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OFAPPtAL 


ellate  Distriei 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGFLES 


SCHOOL  OF  LAW 
LIBRARY 


A  TREATISE 


ON    THE 


POWER  OF  TAXATION, 

STATE  AND  FEDERAL, 
IN  THE  UNITED  STATES. 


By  FREDERICK  N.  JUDSON, 
OF  THE  St.  Louis  Bar. 


ST.  LOUIS: 
THE  F.  H.  THOMAS  LAW  BOOK  CO. 

1903. 


T 
)903 


Entered  according  to  Act  of  Congress  in  the  year  1902,  by 

FREDERICK  N.  JUDSON, 
In  tlie  office  of  the  Librarian  of  Congress,  at  Washington. 


Press  of 

Nixon --/ones  Printing  Co., 

St.  Louis,  Mo. 


PREFACE. 

The  office  of  a  preface  to  a  law  treatise,  at  this  time  when 
our  profession  is  overwhelmed  with  books,  is  to  give,  if 
possible,  a  reason,  or  at  least  an  excuse,  for  the  publication. 

The  study  of  the  tax  system  of  any  State  impresses  one 
with  the  clear  distinction  between  the  taxing  power  of  the 
State  under  our  complex  government,  and  the  construction 
of  the  statutes  enacted  by  the  State  in  the  exercise  of  that 
power.  Our  States  are  sovereign  in  taxation,  subject  to  the 
restrictions  of  the  Federal  Constitution  and  to  the  limita- 
tions necessarily  growing  out  of  our  dual  form  of  govern- 
ment. Under  the  Fourteenth  Amendment,  the  power  of 
the  Federal  government  secures  due  process  of  law  and  the 
equal  protection  of  the  laws  in  the  exercise  of  this  sovereign 
State  authority,  so  that  there  is  a  "Federal  question," 
whereon  the  Federal  jurisdiction  may  be  invoked,  in  every 
tax  case  in  which  these  fundamental  rights  are  claimed  to 
be  denied. 

Questions  of  taxation  are  now  engaging  the  attention  of 
the  legislatures  and  of  the  courts,  as  well  as  of  the  econo- 
mists,  to  a  greater  extent  than  ever  before.  New  experi- 
meq.ts  in  taxation  are  being  tried  in  the  attemjot  to  reach 
the  infinite  forms  of  property  and  business  under  the  com- 
plex conditions  of  modern  society.  It  was  said  by  the 
Supreme  Court  of  the  United  States  in  a  recent  opinion 
that  it  is  only  of  late  years,  when  the  burdens  of  taxation 
are  increasing  by  reason  of  the  great  expenses  of  govern- 

(iii) 


81S158 


IV  PREFACE. 

ment,  that  the  objects  and  modes  of  taxation  have  become 
a  matter  of  special  scrutiny.!  in  this  case  the  court  held 
unconstitutional  a  Federal  tax  which  had  been  exercised 
without  question  at  different  periods  for  over  a  hundred 
years  since  the  foundation  of  the  government,  and  said  that 
the  delay  in  presenting  such  questions  was  no  excuse  for 
not  sivins  them  full  consideration  and  determining  them  in 
accordance  with  the  true  meaning  of  the  Constitution. 

So  great  is  the  diversity  in  the  details  of  State  taxing 
systems  and  so  many  are  the  cases  involved  in  their  con- 
struction and  apphcation,  that  the  inclusion  of  this  great 
volume  of  accumulated  case  law  on  taxation  in  an  in- 
tellioent  form  with  the  different  State  constitutions  and 
statutes  expounded  and  applied  would  now  require  a  pub- 
lication of  cj'clopedic  proportions.  Thus  in  the  last  an- 
nual digest  there  are  nearly  one  thousand  different  tax 
cases  digested,  many  of  these  involving  several  distinct 
points  of  decision,  which  are  separately  digested. 

The  taxing  power  of  the  States  under  the  limitations  of 
the  Constitution  of  the  United  States  and  the  taxing  power 
of  Congress  under  the  grants  of  the  Constitution  have  been 
expounded  and  developed  by  the  Supreme  Court  of  the 
United  States,  the  supreme  arbiter  of  the  Constitution, 
for  more  than  a  centur}^  and  it  is  believed  that  the 
time  has  come  when  the  rules  formulated  by  this  tribunal 
defining  the  limits  of  the  taxing  power,  both  State  and 
Federal,  may  be  definitely  and  connectedly  stated.  These 
rules  are  "judge  made"  law  evolved  by  the  court  for  the 
complicated  conditions  of  modern  business  from  this  gradu- 
ally developed  conception  of  the  relations  of  the  States  to 
the  Federal  government.  Liberal  use  therefore  has  been 
made  of  quotations  from  the  opinions  of  the  court  in  formu- 
lating and  announcing  these  rules,  including  not  only  the 

1  Fairbank  v.  United  States,  181  U.  S.  1.  c.  312.  . 


PREFACE.  V 

prevailing,  but  sometimes  the  dissenting,  opinions,  as  the 
latter  have  not  been  without  their  use  in  the  development 
of  the  law  on  this  subject.  Many  of  these  opinions,  nota- 
bly those  of  Chief  Justice  Marshall  and  the  late  Justices 
Bradley,  Field  and  Miller,  and  those  of  the  present  mem- 
bers of  the  court,  are  valuable  contributions,  not  only  to 
the  constitutional  law  of  taxation,  but  to  the  practical  solu- 
tion of  the  vexed  and  intricate  problems  of  taxation  by  our 
dual  sovereignties  under  our  complex  modern  conditions. 

It  is  the  aim  of  this  work  to  show  the  limitations  of  the 
taxing  j)ower  of  the  State  and  of  the  Federal  government 
so  far  as  these  limitations  have  been  declared  and  ex- 
pounded by  the  Supreme  Court  of  the  United  States. 
Decisions  of  the  State  courts  and  inferior  Federal  courts 
have  been  cited  as  applying  or  illustrating  the  limitations 
thus  declared.  These  limitations  fix  what  the  State  can 
tax.  What  it  has  taxed  must  be  learned  from  its  own 
statutes  and  the  decisions  of  its  own  courts.  What  it 
ought  to  tax  is  a  question  for  economists  and  reformers. 

To  save  unnecessary  repetition,  the  Supreme  Court  of 
the  United  States  is  mentioned  as  the  Supreme  Court  only, 
and  is  thus  distinguished  from  the  Supreme  Courts  of  the 
States,  the  titles  of  which  include  the  names  of  the 
States.  For  convenience  of  reference,  the  appendix  con- 
tains the  Constitution  of  the  United  States  and  also  the 
most  important  and  illustrative  provisions  of  the  respective 
State  constitutions  relating  to  taxation. 

I  must  acknowledge  the  very  efficient  services  of  Mr. 
McVeigh  Harrison  of  the  St.  Louis  Bar,  in  general  revision, 
reading  proof  and  preparing  index ;  and  also  of  Mr.  Wil- 
liam B.  Hale,  now  of  the  New  York  Bar,  in  the  collection 
of  State  cases,  and  of  Mr.  J.  Clarence  Taussig  of  the  St. 
Louis  Bar  in  the  compilation  of  State  constitutions.  I  have 
also  been  assisted  by  Mr.  Lee  M.  Edgar  in  preparing  the 
table  of   cases;   and  must  acknowledge  the    consideration 


VI  PREFACE. 

of  my  law  partner,  Mr.  John  F.  Green,  during  the  neces- 
sary interruption  of  an  active  practice  by  the  preparation 
of  this  book  for  the  press. 

FKEDERICK  N.  JUDSON. 
St.  Louis,  Nov.,  1902. 


TABLE  OF  CONTENTS. 


CHAPTER    I. 

LIMITATIONS  UPON  STATE  TAXATION  GROWING  OUT  OF  THE 
RELATIONS  OF  THE  STATE  AND  FEDERAL  GOVERNMENTS. 

§      1.  Taxation  and  Constitution  of  United  States. 

2.  Constitution  in  relation  to  State  and  Federal  power  of  taxation. 

3.  Concurrent  powers  of  internal  taxation. 

4.  Judicial  construction  of  Federal  taxing  power. 

5.  Restraints  upon  State  taxation  developed  by  judicial  construction. 

6.  Importance  of  decision  in  McCuUoch  v.  Maryland. 

7.  Opinion  in  McCulloch  v.  Maryland. 

8.  Osborn  v.  United  States. 

9.  Brown  v.  Maryland. 

10.  U.  S.  securities  not  taxable  by  States. 

11.  Legal  tender  notes,  etc.,  made  taxable  by  Act  of  Congress. 

12.  Bonds  of  District  of  Columbia  exempted. 

13.- Statutory  declaration  of  exemption  not  essential. 
U.  Salaries  of  U.  S.  oflScials  not  taxable. 

15.  State  tax  upon  passengers  in  mail  coaches  invalid. 

16.  Taxation  of  banks  holding  U.  S.  securities  invalid. 

17.  Corporate  franchise  tax  distinguished  from  property  tax. 

18.  Taxable  corporate  franchise  defined. 

19.  Taxation  of  shares  of  corporations  holding  Federal  securities. 

20.  State  tax  upon  interstate  passengers  invalid. 

21.  Lands  and  other  property  of  U.  S.  not  taxable  by  States. 

22.  Limitations  of  exemption  of  U.  S.  lands,  etc. 

23.  Lands  granted  to  railroads,  when  taxable. 

24.  Title  essential  for  State  taxation. 

25.  Ores  from  mineral  lands  taxable. 

26.  Indian  Reservations  not  taxable. 

27.  Cattle,  etc.,  of  non-Indians  on  Indian  Reservations  taxable. 

28.  State  taxation  of  railroads  incorporated  by  United  States. 

29.  Railroad  franchises  granted  by  United  States  not  taxable. 

30.  Definition  of  U.  S.  franchise. 

31.  Intangible  and  tangible   property  of  railroads    incorporated  by 

U.  S.  taxable. 

32.  Letters  patent  and  copyrights. 

(vil) 


Vlll  TABLE    OF    CONTENTS. 

§    33.  Corporate  capital  invested  Iq  patent  rights. 

34.  State  tax  on  bequests  to  U.  S. 

35.  U.  S.  securities  not  exempt  from  State  inlieritance  tax. 

36.  Treaty -making  power  and  State  taxation. 

37.  Tax  evasion  tlirough  investments  in  U.  S.  securities. 

38.  Payment  of  State  taxes  in  coin  sustained. 


•CHAPTER    II. 

CONTRACTS  OF  EXEMPTION  FROM  TAXATION^  p.  44. 

39.  Legislative  grants  held  to  be  contracts. 

40.  Grant  of  exemption  held  contract. 
4L  Contracts  of  exemption  not  implied. 

42.  Validity  of  tax  exemption  contracts  established. 

43.  Application  to  consolidated  corporation. 

44.  Ohio  bank  tax  cases. 

45.  Missouri  exemptions  enforced  against  constitutional  repeal. 

46.  Opinion  in  Missouri  cases. 

47.  Dissent  in  Missouri  cases. 

48.  Northwestern  University  and  other  cases. 

49.  Bank  notes  and  coupons  made  receivable  for  taxes. 

60.  Tennessee  constitutional  amendment  held  void. 

61.  Mississippi  notes  in  aid  of  Confederacy  held  void. 

52.  Change  in  remedy  not  impairment  of  contract. 

53.  Virginia  Coupon  Cases. 

64.  Virginia  Coupon  Cases  under  Act  of  1882. 

55.  Supreme    Court    on    Eleventh    Amendment    of    U.    S.    Consti- 

tution. 

56.  Later  Virginia  Coupon  Cases. 

57.  Supreme  Court  on  Virginia  court  overruling  previous  opinion. 

58.  Supreme   Court  determines  for  itself  whether   State  legislation 

constitutes  contract. 
69.  Illustrations  of  independent  judgment  as  to  contract., 

60.  Contract  must  be  properly  brought  before  court. 

61.  When  State  court  not  followed. 

62.  When  concluded  by  decision  of  State  court. 

63.  When  and  to  what  extent  State  court  is  followed.         ♦ 

64.  Limitation  of  independent  judgment. 

65.  Contract  only  impaired  by  law. 

66.  Impaired  by  municipal  ordinance  having  force  of  law. 

67.  What  constitutes  contract  of  exemption. 

68.  Railroad  franchise  is  property. 

69.  Conditional  exemptions. 

70.  Definition  of  corporate  dividend. 


TABLE    OF    CONTENTS.  IX 

i    71.  Tax  on  foreign  held  securities. 

72.  Taxation  by  State  or  municipality  of  its  own  securities. 

73.  Contract  right  to  tax  as  remedy. 

74.  Remedy  may  be  changed,  if  substantial  right  not  impaired. 

75.  Conti-aciual  and  governmental  legislation  distinguished. 

76.  Municipal  charter  powers  not  contractual. 

77.  Taxation  by  State  of  property  of  municipal  corporations. 

78.  State  control  of  proceeds  of  municipal  taxation. 

79.  Retrospective  legislation  and  vested  rights. 

80.  Justice  Miller  on  legislative  contracts. 

81.  Tax  exemption  not  implied  from  license. 

82.  Bounties  and  privileges. 

83.  Consideration  for  exemption  essential. 

84.  Judgment  for  torts  not  contract. 

85.  Tax  exemption  repealed  under  general  power  reserved  to  amend 

or  repeal. 

86.  Tax  exemption  strictly  construed. 

87.  "Immunity"  and  "privilege"  distinguished. 

88.  Lost  by  change  of  business. 

89.  Lost  by  repeal  before  incorporation  or  issue  of  stock. 

90.  Tax  exemption  is  personal  immunity. 

91.  Transferable  franchises  defined.  ■ 

92.  Effect  of  railroad  consolidation  on  tax  exemptions. 

93.  Corporate  exemption  limited  to  specific  form  of  taxation. 

94.  Property  of  corporations  and  shareholders  distinguished  in  con- 

tracts of  exemption. 

95.  Capital  stock  and  surplus  of  corporations. 

96.  Special  assessments. 

CHAPTER    III. 

REGULATION  OF  COMMERCE,  p.  96. 

97.  Express  restraint  upon  taxing  power  of  State. 

98.  Necessity  for  national  control  over  commerce. 

99.  Mr.  Madison  on  necessity  of  national  control  of  commerce. 

100.  National  control  of  commerce,  the  comprehensive  limitation. 

101.  Gibbons  v.  Ogden. 

102.  Brown  v,  Maryland. 

103.  Original  package  rule. 

104.  License  tax  on  importer  also  void  as  regulation  of  commerce. 

105.  Regulation  of  commerce  during  non-action  of  Congress. 

106.  Freedom  of  interstate  commerce. 

107.  Consent  of  Congress  to  State  regulation. 

108.  Judicial  construction  of  "  arrival "  in  State. 


X  TABLE    OF    CONTENTS. 

§  109.  Duties  on  imports  relate  only  to  foreign  imports. 

110.  Woodruff  w.  Parhaiu. 

111.  Importations  from  other  States  taxable  in  original  packages. 

112.  Tax  must  be  without  discrimination. 

113.  Taxability   of  goods  from   other  States  not  affected  Vjy  Leisy  •». 

Hardin. 

114.  Original    packages    in    interstate   commerce  as  to  State  police 

authority. 

115.  What  is  an  original  package.  ? 

UG.  Theory  of  the  exemption  of  original  packages  from  State  laws. 

117.  The  exemption  only  extends  to  the  importer. 

1 18.  Form  of  tax  is  immaterial. 

1 19.  Intent  to  export  is  insufficient  to  escape  taxation. 

120.  Property  in  commercial  transit. 

121.  Coe  V.  Errol. 

122.  Same  rule  in  interstate  as  in  foreign  shipments. 

123.  Taxation  of  floating  logs  and  droves  of  sheep. 

124.  Termination  of  commercial  transit. 

125.  Inheritance  tax  on  aliens  not  tax  on  exports. 

126.  License  tax  ou  foreigu-exchange-broker  not  tax  on  exports. 

127.  State  taxing  power  in  relation  to  imports  and  exports. 

128.  State  tax  on  immigrants  or  passengers  is  void. 

129.  State  inspection  laws  and  interstate  commerce. 


CHAPTEK     lY. 

REGULATION  OF  COMMERCE  CONTINUED,  p.  137. 

130.  Era  of  discriminating  State  taxation. 

131.  Privileges  and  immunities  of  citizens. 

132.  Any  discrimination  in   State  taxation  in  favor  of  citizens  or  resi- 

dents as  against  non-residents  is  interference  with  commerce. 

133.  Discriminating  taxation  condemned  in  State  courts. 

134.  Discrimination  in  taxation  in  favor  of  products  of  State  as  against 

products  of  other  Slates  invalid. 

135.  Supreme  Court  in  Welton  v.  Missouri. 

136.  What  constitutes  discrimination. 

137.  Discrimination  must  relate  to  interstate  commerce. 

138.  Taxation  of  commercial  travelers  from  other  States  invalid. 

139.  Supreme  Court  in  Robbins  v.  Shelby  County  Taxing  District. 

140.  Interstate  commerce  cannot  be  taxed  at  all. 

141.  Doctrine    of    Robbins  v.    Shelby    County    Taxing    District  re- 

affirmed, f 

142.  Supreme  Court  in  Brennan  v.  Titusville. 

143.  Taxation  of  commercial  brokers. 


TABLE    OF    CONTENTS.  XI 

§  144    Supreme  Court  in  Ficklen  v.  Shelby  County  Taxing  District. 

145.  Stocliard  v.  Morgan  on  commercial  brokers. 

146.  The  form  of  commercial  agency  immaterial. 

147.  Only  interstate  commerce  agencies  exempt. 

148.  Sale  of  goods  in  State  subject  to  taxing  power  of  State. 

149.  Discriminatioa  must  bj  mora  thin  incidental  disadvantage. 

150.  Tax  upon  peddlers  without  discrimination  as  against  residents  or 

subjects  of  other  States  is  valid. 

151.  Definition  of  peddler. 

152.  Peddlers  and  drummers. 

153.  Licensing  under  police  power. 

154.  Police  power  cannot  interfere  with  interstate  commerce. 

155.  Supreme  Court  not  concluded  by  title  as  to  purpose  of  act. 

156.  Is  license  act  void  in  part,  void  in  toto'? 


CHAPTER    Y. 

REGULATION  OF  COMMERCE,  CONTINUED,  p.  171. 

157.  Rights  of  foreign  corporations  in  interstate  commerce. 

158.  Foreign  corporation   '*^  does  business  "  in  the  State  only  through 

comity  of  State. 

159.  Right  to  impop-e  discriminating  taxation  as  condition  of  admission 

into  State. 

160.  Foreign  insurance  companies. 

161.  Same  principle  extended  to  foreign  insurance  associations. 

162.  Foreign  corporations  not  admitted  into  State  under  United  States 

treaty. 

163.  State  has  power  to  change  conditions  of  admission  of  foreign  cor- 

porations. 

164.  Retaliatory  legislation  in  condition  for  admission. 

165.  Pembina  Mining  Company  v.  Pennsylvania. 

166.  Horn  Silver  Mining  Company  v.  New  York. 

167.  Right  to  discriminate  against  foreign  corporations. 

168.  Discrimination  limited  to  imposition  of  conditions  for  admission. 

169.  Distinction  however  academic  rather  than  practical. 

170.  Holding  United    States    bonds  by  foreign  corporation    does  not 

exempt  It  from  taxation  on  corporate  franchises. 

171.  Nor  is  foreign  corporation  engaged  in  importing  business  exempt 

from  tax  on  corporate  franchises. 

172.  Tax  upon  capital  employed  within  State. 

173.  Discrimination  in  favor  of  State  manufactures  in  foreign  corpora- 

tion tax. 

174.  "Doing  business  "  in  State. 

175.  What  is  not  "  doing  business  "  in  State.  '^ 


Xll  TABLE    OF    CONTENTS. 

§  176.  Ownership  of  property  in  State  does  not  or  itself  constitute  "  doing 
business"  in  State. 

177.  Holding  stock  in  domestic  company  by  foreign   company   is  not 

*'  doing  business  "  by  latter  ia  State. 

178.  Supreme  Court  of  Pennsylvania  on  what  constitutes  "  doing  busi- 

ness." 

179.  Wtiat  is  "  doing  business  "  in  State. 

180.  ♦'  Doing  business  "  by  holding  interest  in  limited  partnership. 

181.  Must  have  business  domicile  iu  State. 

182.  Corporations  engaged  in  Federal  business  or  interstate  commerce. 

183.  Corporations  engaged  in  "carrying  on  interstate  commerce." 

184.  Corporation  carrying  on  interstate  commerce  not  exempt  from 

charges  for  privilege  of  incorporation. 

CHAPTER     YI. 

REGULATION  OF  COMMERCE  — THE  TAXATION  OF  STEAM- 
BOATS AND  VESSELS,  p.  197. 

185.  Taxation  of  vessels  as  property. 

186.  Taxable  situs  of  steamboats  and  vessels  at  home  port. 

187.  Situs  not  affected    by  temporary   enrollment   as  coaster  else- 

where. 

188.  Steamboats  on  rivers  and  great  lakes. 

189.  Home  port  not  conclusive   as  to   situs  when  vessels  are  perma- 

nently and  exclusively  employed  elsewhere. 

190.  State  cannot  tax  privilege  of  navigating  public  waters. 

191.  Steam  tugs  cannot  be  taxed  for  privilege  of  navigating  rivers. 

192.  Police  control  by  State  over  vessels  in  harbor  or  in  transit. 

193.  Power  of  State  to  license  oyster  boats  and  fisheries. 

194.  State  may  exact  tolls  for  using  rivers  and  harbors  improved  at  its 

own  cost. 

195.  Taxation  of  ferries  and  bridges. 

196.  Gloucester  Ferry  Co.  u.  Pennsylvania- 

197.  Taxation  of  interstate  bridges. 

198.  Taxation  of  interstate  bridge  not  interference  with  interstate 

commerce. 

199.  Taxation  of  tonnage. 

200.  Property  taxation  and  compeasation  for  services  distinguished 

from  tonnage. 

201.  Supreme  Court  on  tonnage  duties  and  wharfage  charges. 

202.  Wharfage  charges  may  be  graduated  by  tonnage. 

203.  But  wharfage   and   similar  charges  must  be  without  discrimi- 

nation. 

204.  Quarantine  and  pilotage  charges. 


TABLE    OF   CONTENTS.  xiii 


CHAPTER    yil. 

TAXATION  OF  INTERSTATE  COMMERCE,  p.  222. 

§  205.  Difficulty  of  defining  line  between  Federal  and  State  power. 

206.  License  taxation. 

207.  Osborne  v.  Mobile. 

208.  Osborne  v.  Mobile  overruled. 

209.  License  tax  on  agents  of  interstate  railroads  held  invalid. 

210.  Immaterial  that  license  interfering  with  commerce  purports  to  be 

for  regulation  and  not  for  revenue. 
2n.  License  for  privilege  of  transacting  local  business  is  valid. 

212.  Decision  of  State  court  that  license  only  applies  to  local  business 

conclusive. 

213.  It  must  clearly  appear  that  intra-state  business  alone  is  taxed. 

214.  License     must    not    be    condition    for    transacting     interstate 

business. 

215.  License  or  privilege  tax  not  exceeding  tax  on  property  valid. 

216.  Tax  on  interstate  telegraph  messages  invalid. 

217.  Privilege  tax  on  sleeping  cars. 

218.  Compensallon  exacted  by  ci'>.y  for  use  of  poles  in  streets  not  reg- 

ulation of  commerce. 

219.  Payment  reserved  as  bonus  in  railroad  charter  not  regulation  of 

commerce. 

220.  Taxation  of  rolling  stock. 

221.  Rule  of  average  of  habitual  use  adopted. 

222.  Supreme  Court  on  taxable  situs  of  railroad  cars. 

223.  Taxation  of  refrigerator  cars. 

224.  Mileage  apportionment  in  tax.ation  of  rolling  stock. 

225.  State  tax  on  freight  invalid. 

22G.  State  tax  on  railway  gross  receipts. 

227.  Mileage  apportionment  in  interstate  railway  taxation, 

228.  Taxation  of  net  earnings  sustained. 

229.  Tax  on  gross  earnings  held  invalid. 

230.  Tax  on  gross  receipts  held  invalid  in  State  courts. 
23L  Maine  v.  Grand  Trunk  R.  R.  Co. 

232.  Tax  on  gross   earnings  apportioned   by  mileage  valid  as  excise 

tax. 

233.  Principle  reaffirmed. 

234.  Immaterial  whether  corporation  is  domestic  or  foreign. 

235.  Tax  not  upon  receipts    as  such,  but  excise  tax  apportioned  to 

receipts. 

236.  State  tax  on  net  receipts. 

♦237.  Valuation  of  property  by  capitalization  of  receipts. 


XIV  TABLE    OF    CONTENTS. 


CHAPTER     yill. 

VALUATION  OF  INTERSTATE   PROPERTIES  FOR  TAXATION, 

p.  264. 

§  238.  Right  of  property  taxation  conceded. 

239.  Unit  rule. 

240.  Illinois  railroad  cases. 

241.  Supreme  Court  on  situs  of  railroad  property. 

242.  Supreme  Court  on  apporliotiraent. 

243.  Application  of  uuit  rule  to  interstate  railroads. 

244.  Supreme  Court  on  mileage  apportionment  in  interstate  railroads. 

245.  Exceptional  circumstances  may  make  mileage  rule  inapplicable. 

246.  Rulings  on  testimony  not  reviewed  iu  Supreme  Court  unless  bear- 

ing on  Federal  question. 

247.  Entire  property  may  be  considered  in  valuation  of  portion  witliin 

State. 

248.  Value  of  property  in  use  may  be  considered  in  valuation. 

249.  Unit  and  mileage  rule  as  applied  to  taxation  of  telegraph  com- 

panies. 

250.  Value  of   property  outside  State  to   be  considered  in   valuation 

under  mileage  apportionment. 

251.  Unit  rule  applied  to  express  companies. 

252.  Ohio  express  company  cases. 

253.  Special  circumstances  requiring  deduction  must  be  shown. 

254.  Rehearing  of  express  company  cases  denied. 

255.  Intangible  property  of  corporation  properly  considered  in  valuation. 

256.  Distinction  between  construction  of  statute  and  taxing  power  of 

State.  » 

257.  Property  must  be  shown  to  be  exempt  by  company. 

258.  Situs  of  intangible  property  of  interstate  company. 

259.  Kentucky  express  company  case. 

260.  Power  of  State  in  valuing  interstate   properties  as   defined   by 

Supreme  Court. 

261.  Evidence  of  inapplicability  of  mileage  rule  admissible. 

262.  Stock  market  quotations  as  evidence  of  value. 

263.  Presumption  that  all  evidence  submitted  was  considered  in  valua- 

tion. 

CHAPTER     IX. 

TAXATION  OF  NATIONAL  BANKS,  p.  296. 

264.  Taxing  authority  of  States  over  national  banks. 

265.  Amendment  of  1868.  • 


TABLE    OF    CONTENTS.  XV 

§  266.  Supreme  Court  on  U.  S.  statute  authorizing  State  taxation  of 
national  banks. 

267.  Metliod  of  State  taxation  allowed  by  U.  S.  statute  is  exclusive. 

268.  State  franchise  tax  not  enforceable  against  national  banks. 

269.  State  may  require  bank  to  pay  tax  for  shareholders. 

270.  Place  of  taxation. 

271.  Manner  of  assessment. 

272.  Real  estate  in  other  States  not  deducted  from  value  of  shares. 

273.  Territories    have    same    taxing  pov?er    as  States  over  national 

banks. 

274.  No  deduction  on  account  of  holding  United  States  securities. 

275.  Discrimination  through  taxation   of  State  banks  on  capital  or 

property. 

276.  Other  moneyed  capital  is  *'  other  taxable  moneyed  capital." 

277.  Equality  of  taxation  vpith  other  moneyed  capital. 

278.  Discriminations  through  exemptions  from  taxation.     • 

279.  Allegations  of  discriminating  exemption  held  to  require  answer. 

280.  Rules  of  Supreme  Court  as  to  discrimination. 

281.  Discriminating  exemption  must  be  of  competing  moneyed  capital. 

282.  Meaning  of  ''  other  moneyed  capital." 

283.  No  discrimination  in  New  York  taxation  of  railroad,  business, 

mining  or  insurance  companies. 

284.  No  discrimination  in  New  York  taxation  of  trust  companies. 

285.  Nor  in  exemption  of  savings  banks,  building  and  loan  associations 

or  stock  in  foreign  corporations. 

286.  Discrimination  through  deduction  of  debts  from  "  other  moneyed 

capital." 

287.  No  discrimination  in  deduction  of    debts  from  non- competing 

capital. 

288.  No    discrimination    in   deduction   of    debts   of    unincorporated 

banks. 

289.  Discrimination  through  failure  to  assess  other  moneyed  capital. 

290.  Discrimination  must  be  substantial. 

291.  Difference  in  the  rate  of  taxation  not  necessarily  discriminative. 

292.  Equality  of  taxation  requires  equality  in  valuation  as  in  rate  of 

taxation. 

293.  Supreme  Court  on  assessors'  practice  of  valuation. 

294.  Inequality  must  be  intentional  and  habitual. 

295.  Mere  mistake  in  judgment  no  discrimination. 

296.  Formal  resolution  not  necessary  for  intentional  discrimination. 

297.  Difference  in  valuation  between  different  classes  of  personalty  not 

discriminative  against  national  banks. 

298.  Taxation  of  real  estate  of  national  banks. 

299.  Double  taxation  of  national  banks. 

300.  Enforcement  of  tax. 

301.  Visitorial  power  of  State  over  national  bankQ. 


Xvi  TABLE    OF    CONTENTS. 

CHAPTER    X. 

THE  FOURTEENTH  AMENDMENT,  p.  346. 

§  302.  Occasion  and  immediate  purpose  of  amendment. 

303.  Slaughter  House  Cases. 

304.  Privileges  and  immunities  of  citizens  of  United  States. 

305.  Construction  of  amendment. 

306.  Amendment  applies  only  to  State  action. 

307.  Protection  not  limited  to  citizens. 

308.  Corporations  are  "  persons  "  under  Fourteenth  Amendment. 

309.  "  Any  person"  and  "  any  person  within  the  jurisdiction  "  distin- 

guished. 

310.  Application  of  amendment  to  State  taxation. 

311.  Justice  Field  on  Fourteenth  Amendment  and  State  taxation. 

312.  Circuit  Judge  Jackson  on  Fourteenth    Amendment    and    State 

taxation. 

313.  «' Due  process  of  law  "  and  ''the  equal  protection  of  the  laws  " 

distinguished. 

314.  Fourteenth  Amendment  in  State  courts. 

315.  Substance  and  not  form  regarded  in  alleged  violations  of  Four- 

teenth Amendment. 

316.  Fourteenth  Amendment  in  condemnation  for  public  purposes. 


CHAPTER    XI. 

DUE  PROCESS  OF  LAW  IN  TAX  PROCEDURE,  p.  372. 

317.  Due  process  of  law  is  "  the  law  of  the  land." 

318.  Due  process  of  law  in  taxation  does  not  require  judicial  hearing. 

319.  Notice  and  hearing  not  required  in  cases  of  licenses,  etc. 

320.  Hearing  not  required  where  valuation  is  fixed  by  taxpayer. 

321.  Where  amount  of  tax  is  dependent  on  valuation,  hearing  is  re- 

quired. 

322.  Notice  and  hearing  in  inheritance  taxes. 

323.  Rehearing  or  appeal  to  courts  not  required  in  valuation. 

324.  Ruling  of  State  court  that  hearing  is  required  is  conclusive. 

325.  Personal  notice  of  public  session  of  revision  boards  not  required. 

326.  Provision  for  notice  may  be  implied. 

327.  Distinction  between  assessments  for  general  and  special  taxation. 

328.  Notice  by  publication. 

329.  Due  process  satisfied   by  opportunity  for  hearing  at  any  stage  of 

proceeding. 

330.  Collection  of  taxes  through  summary  proceedings. 


TABLE    OF    CONTENTS.  XVU 

(  331.  Collection  of  taxes  through  distraint  and  seizure. 

332.  Legislative  discretion  in  imposing  penalties  on  delinquents. 

333.  Plenary  power  of  State  in  assessments  and  re-assessments. 

334.  Legislative  legalization  of  defective  assessment  held  void. 

335.  Forfeiture  of  lands  for  taxes. 

336.  New  remedies  for  coilection  of  taxes  may  be  adopted. 

337.  Effect  of  statutory  conclusiveness  of  tax  deeds. 

338.  Essentials  only  considered  as  to  due  process  of  law  in  tax  pro- 

cedure. 

339.  Limitation  and  curative  statutes. 


CHAPTER    XII. 

DUE  PROCESS   OF  LAW  AND  THE  PUBLIC  PURPOSE  OF  TAXA- 
TION, p.  404. 

340.  Public  purpose  essential  in  taxation. 

341.  Loan  Association  v-  Topeka. 

342.  Municipal  bonds  held  invalid  for  want  of  public  purpose. 

343.  Public  purpose  of  taxation  under  Fourteenth  Amendment. 

344.  Supreme  Court  on  Loan  Association  v.  Topeka. 

345.  City  taxation  of  annexed  farming  lands  sustained. 

346.  What  is  public  purpose  for  taxation? 

347.  ConHicting  judicial  opinions  as  to  public  purpose  necessary  for 

taxation. 

348.  Erection  of  public  sorghum  mills  not  public  purpose. 

349.  Inspiration  of  patriotism  lawful  public  purpose. 

350.  Taxation  for  public  ownership. 

351.  Public  purpose  in  eminent  domain. 

352.  Any  proceeding  dependent  upon  taxation   for  private  purpose 

invalid. 

353.  Railroad  aid  bonds. 

354.  Purpose  of  taxation  must  not  only  be  public  but  pertain  to  district 

taxed. 

CHAPTER    XIII. 

DUE  PROCESS  OF  LAW  IN  SPECIAL  ASSESSMENTS  FOR  LOCAL 
IMPROVEMENTS,  p.  432. 

355.  Special  assessments  made  under  taxing  power 

356.  Peculiar  difficulties  in  special  assessments. 

357.  Fifth  and  Fourteenth  Amendments  in  relation  to  special  assess- 

ments. 

358.  General  power  of  State  in  local  assessments. 

2 


XVI 11  TABLE    OF    CONTENTS. 

§  359.  Power  of  State  to  impose  taxation  upon  municipalities, 

360.  Power  of  State  limited  by  its  jurisdiction. 

361.  Assessments  for  drainage. 

362.  Assessments  for  irrigation. 

363.  Public  improvements  in  municipalities. 

364.  Difficulty  of  determining  special  benefits. 

365.  Apportionment  of  cost  of  municipal  public  improvements. 

366.  Special  benefits  under  State  constitutions. 

367.  Legislative  discretion  in  apportionment. 

368.  Consideration  of  special  benefits  excluded  by  legislative  appor- 

tionment. 

369.  Legislative  power  not  unlimited. 

370.  Supreme  Court  on  assessments  for  municipal  improvements. 

371.  Supreme  Court  on  assessments  for  sewers.  •   - 

372.  Supreme  Court  on  assessments  for  streets  and  sidewalks. 

373.  Benefit  districts  for  street  improvements. 

374.  Special  assessments  for  public  parks. 

375.  If  assessment  is  set  aside,  reassessment  may  be  made. 

376.  Notice  and  opportunity  for  hearing. 

377.  Notice  and  hearing  under  legislative  apportionment. 

378.  Hearing  nut  required  before  including  property  in  benefited  dis- 

trict. 

379.  Notice  to  parties  liable  to  be  assessed  in  street  openings  not  re- 

quired. 

380.  Express  finding  of  benefits  not  required. 

381.  Enforcement  of  special  assessments. 

382.  Conclusiveness  of  State  determination. 

383.  Supreme  Court  in  Norwood  v.  Baker. 

384.  Norwood  »,  Baker  in  State  courts  and  U.  S.  Circuit  Courts. 

385.  Norwood  v.  Baker  limited  to  its  "  special  facts." 

386.  Municipal  bonds  payable  from  assessments  held  valid  notwith- 

standing invalidity  of  assessment. 

387.  Supreme  Court  in  King  v.  Portland. 

388.  Legislative  power  and  special  facts. 

389.  Accidental  or  exceptional  circumstances. 

390.  Requirements  of  "  due  process  of  law." 

CHAPTER    XIV. 

DUE  PROCESS  OF  LAW  AND  THE  JURISDICTION  OF  THE 
STATES,  p.  497. 

§  391.  Tax  must  be  levied  upon  subjects  within  jurisdiction  of  State. 
392.  Limitation  of    taxing  power  by  jurisdiction  not  dependent  on 
Fourteenth  Amendment. 


TABLE    OF    CONTENTS.  XIX 

§  393.  Jurisdiction  of  State  in  taxation  of  property. 

394.  State  may  tax  money  and  securities  in  its  jurisdiction  of  non- 

resident owners. 

395.  Property  in  hands  of  resident  agents  subject  to  taxing  power. 

396.  Jurisdiction  for  taxation  of  credits  not  dependent  upon  residence 

of  agent  or  of  debtors. 

397.  Credits  must  be  localized  in  jurisdiction  for  taxation. 

398.  Enforcement  of  taxes  against  non-resident  owners  of  property  in 

State. 

399.  Power  of  State  in  taxing  corporation  bondholders  through  corpo- 

ration. 

400.  State  cannot  compel  foreign    railroad    company   to   act  as   tax 

collector. 

401.  State  may  make  mortgages  taxable  interests  in  real  estate. 

402.  The  Foreign  Held  Bonds  Case  in  part  overruled. 

403.  State  may  tax  stock  of  non-resident  holders  in  domestic  corpo- 

rations. 

404.  Non-resident  stockholder  not  taxable  in  absence  of  statute. 

405.  Due  process  of  law  in  taxation  of  interstate  properties. 

406.  Due  process  of  law  in  taxation  of  corporations. 

407.  Jurisdiction  in  taxation  over  property  of  trustees,  receivers,  etc. 

408.  State's  jurisdiction  over  property  for  taxation  summarized. 

409.  Taxation  of  business  and  license  taxation. 

410.  License  tax  on  emigrant  agent  sustained. 

411.  Taxation  and  regulation  under  police  power. 

412.  The  Chicago  Cigarette  Ordinance  sustained. 

413.  Limitation  of  power  to  impose  taxes  on  business. 

414.  Jurisdiction  over  persons  for  taxation. 

415.  Domicil  distinguished  from  residence  and  citizenship. 

416.  Right  to  change  domicil. 

417.  Motive  in  change  of  domicil  immaterial. 

418.  Term  "  residence  "  employed  in  sense  of  "  domicil." 

419.  Due  process  of  law  and  taxation  at  domicil. 

420.  Taxation  of  personal  property  situated  without  State  of  owner's 

domicil. 

421.  Taxation  of  citizens  at  domicil  on  mortgages  in  other  States. 

422.  State  may  tax  resident  stockholder  in  foreign  corporation  upon 

value  of  stock. 

423.  No  immunity  of  State  securities  from  taxation  in  other  States. 

424.  Domicil  and  location,  as  situs  for  taxation,  in  same  State. 

425.  Double  taxation  not  presumed. 

426.  Due  process  of  law  and  double  taxation. 

427.  Double  taxation  from  competing  State  authorities. 

428.  Interstate  comity  essential  to  avoid  double  taxation. 

429.  Duplicate  inheritance  taxation. 

430.  Question  one  of  construction  and  not  of  legislative  power. 


XX  TABLE    OF   CONTENTS. 

§  431.  Due  process  of  law  in  taxation  requires  legislative  authority. 

432.  State  construction  of  legislative  authority  conclusive. 

433.  Constitutionality  of  statutes  is  for  judicial,  not  executive,  deter- 

mination. 

CHAPTER    XY. 

EQUAL  PROTECTION  OF  THE  LAWS,  p.  558. 

434.  Immediate  purpose  of  clause. 

435.  What  is  '•  the  equal  protection  of  the  laws?  " 

436.  Equality  in  taxation  under  Fourteenth  Amendment. 

437.  Equality  and  efficiency  in  taxation  through  diversity  of  methods, 

438.  Classification  for  taxation. 

439.  "Equal  protection  of  the  laws"  does  not   require  iron  rule  of 

equal  taxation. 

440.  Specification  of  railroads  is  reasonable  classification  for  taxation. 

441.  Special  methods  of  assessment  of  railroad  property  sustained. 

442.  Eight  of  appeal  not  essential  to  "  equal  protection  of  the  laws." 

443.  Foreign  corporations  and  ''  equal  protection  of  the  laws." 

444.  Exemption  of  producers  in  license  taxation. 

445.  Classification  in  taxation  and  in  police  legislation  compared. 

446.  Difficulty  of  classification. 

447.  Inequality  of  burden  does  not  establish  invalidity  of  tax. 

448.  Equality  and  uniformity  in  inheritance  taxation. 

449.  •'  Equal  protection  of  the  laws  "  in  inheritance  taxation. 

450.  Classification  by  amount  in  license  taxation. 

451.  Property  taxation  and  inheritance  taxation  distinguished. 

452.  Classification  by  exemption. 

453.  Exemption  for  efficiency  in  taxation. 

454.  Classification  for  taxation  of  corporate  securities. 

455.  Constitutional  amendment  held  unconstitutional. 

456.  Anti-Department  Store  Tax  held  unconstitutional. 

457.  Taxation  of  employers  of  foreign  born  persons  held  invalid. 

458.  Discriminations  between  residents  and  non-residents. 

459.  Illegal  discrimination  in  license  taxation. 

460.  Discrimination  in  expenditure  of  public  funds. 

461.  Discrimination  between  races  in  expenditure  of  school  funds. 

462.  Federal  and  State  guaranties  of  equal  taxation. 

CHAPTER    XVI. 

EQUAL  PROTECTION  OF  LA.WS  IN  THE  VALUATION  OF 
PROPERTY,  p.  608. 

463.  Inequality  in  taxation  through  inequality  of  valuation. 

464.  Inequality  of  valuation  from  error  of  judgment. 

465.  Inequality  through  unequal  local  assessments. 


TABLE    OF    CONTENTS.  XXI 

§  466.  Fraudulent  valuation  in  assessments. 

467.  Discrimination  by  undervaluation  of  other  property. 

468.  Dilemma  of  courts  in  remedying  unequal  valuations. 

469.  Habitual  and  intentional  violation  of  assessor's    duty  must  be 

proved. 

470.  Relief  against  discriminating  assessments  in  State  courts. 

471.  Equality  of  valuation  enforced  in  Federal  courts. 

472.  Judge  Taft  on  dilemma  of  courts. 

473.  Judge  Taft  on  distinction  between  sporadic  and  habitual  discrim- 

inations. 

474.  Collection  on  excessive  valuation  enjoined. 

475.  Formal  resolution  not  necessary   for  Intentional  discrimination. 

476.  Chicago  franchise  tax  cases. 

477.  Valuation  by  capitalization  of  net  earnings. 

478.  Inequality  of  valuation  as  Federal  question. 

CHAPTER    XVII. 

TAXING  POWER  OF  CONGRESS,  p.  634. 

479.  Taxing  power  of  Congress  granted  by  Constitution. 

480.  Purpose  for  which  taxing  power  may  be  exercised. 

481.  Appropriation  of  public  money. 

482.  Supreme  Court  on  bounty  legislation. 

483.  Moral  and  equitable  claims  as  "  debts." 

484.  Conclusiveness  of  legislative  determination  as  to  "  debts." 

485.  Taxes,  duties,  imposts  and  excises. 

486.  "What  are  direct  taxes. 

487.  Inheritance  tax  not  direct  tax, 

488.  Direct  taxation  in  economic  sense  and  constitutional  sense  distin- 

guished. 

489.  Direct  tax  defined  by  Supreme  Court  in  Knowlton  v.  Moore. 

490.  Taxing  power  of  Congress  co-extensive  with  territory  of  United 

States. 

491.  Uniformity  in  Federal  taxation. 

492.  Uniformity  in  levy  of  duties. 

493.  Levying  duties  under  the  war  power 

494.  Uniformity  clause  as  applied  to  territorial  acquisitions. 

495.  Insular  decisions. 

496.  Tax  upon  exports, 

497.  Tax  on  foreign  bills  of  lading  is  tax  on  exports, 

498.  Porto  Rican  Tariff  of  1900  not  tax  on  exports. 

499.  Act  conferring  reciprocity  powers  on  President  sustained. 

500.  Taxing  power  of  Congress  with  reference  to  treaty  power. 

501.  State  instrumentalities  and  agencies  exempt  from  Federal  taxa- 

tion. 


XXJl  TABLE    OF    CONTENTS. 

§  502.  State  securities  are  not  exempt  from  Federal  inheritance  taxes. 

503.  Federal  securities  subject  to  Federal  inheritance  taxes. 

504.  Taxing  power  of  Congress  and  State  authority. 

505.  Taxing  power  of  Congress  and  State  franchises - 

506.  Taxing  power  of  Congress  and  police  power  of  State. 

607.  Municipal  corporations  subject  to  internal  revenue  taxation. 

608.  Diminution  of  salaries  by  taxation. 

609.  Progressive  taxation. 

510.  Scope  of  Federal  taxing  power. 

511.  Taxing  power  of  Congress  in  relation  to  interstate  commerce. 

512.  Congress  may  increase  excise  as  well  as  property  tax. 

513.  Taxation  of  property  of  non-resident  aliens. 

514.  Taxation  of  property  of  residents  invested  abroad. 

515.  The  taxing  power  of  Congress  over  Territories. 

516.  Taxation  in  Districtof  Columbia. 

517.  Power  of  Congress  in  enforcing  collection  of  taxes. 

CHAPTER    XYIII. 

THE    ENFORCEMENT   OF    FEDERAL    LIMITATIONS    UPON    THE 
TAXING  POWER,  p.  691. 

518.  Judicial  remedies  for  illegal  taxation. 

519.  Two  forums  for  Federal  question  in  taxation. 
620.  Amount  of  tax  as  affecting  procedure. 

521.  Pleading  Federal  question  in  U.  S.  Circuit  Courts. 

522.  Federal  question  and  right  of  removal. 

523.  Federal  question  on  writ  of  error  to   State  court. 

524.  Questions  of  fact  not  considered  on  writ  of  error  to  State  court. 

525.  Writ  of  error  is  to  highest  State  court  having  jurisdiction. 

526.  Practical  considerations  in  selection  of  procedure. 

527.  Jurisdiction  over  case  and  over  Federal  question  distinguished. 

528.  What  is  Federal  question  in  taxation. 

529.  Federal  right  must  be  set  up  in  adversary  proceeding. 

530.  Injunction  against  taxation  in  Federal  courts. 

531.  Want  of  adequate  remedy  at  law  must  be  shown. 

532.  Injunction  often  only  proper  remedy. 

533.  Procedure  in  lucome  Tax  Cases.    . 

534.  Habeas  corpus  as  remedy  for  illegal  taxation. 

535.  Injunction  only  allowed  on  payment  of  taxes  actually  due. 

536.  When  application  must  first  be  made  to  State  board. 

537.  State  statutory  remedies  do  not  oust  equitable  jurisdiction  of 

Federal  courts. 
638.  State  can  only  be  sued  with  its  consent. 
539.  Suit  against  State  and  State  officials  distinguished. 


TABLE    OF    CONTENTS.  XXIU 

§  540.  Where  jurisdiction  depends    upon  party,  it  is  party   named  in 
record. 

541.  Collection  of  taxes    on    property  in    possession    of    receiver  of 

Federal  court. 

542.  Jurisdiction  and  defenses  to  merits. 

543.  Judiciary  concluded  by  decision  of  political  department  of  gov- 

ernment. 

544.  No  equity  jurisdiction  in  Federal  courts  to  enforce  levy  of  tax. 

545.  Mandamus  to  issue  tax. 

546.  Mandamus  must  be  based  upon  statute  authorizing  tax. 

547.  Local  tax  laws  administered  in  Federal  courts. 

548.  Local  law  and  general  law  distinguished. 
54y.  Suits  by  stockholders  in  right  of  corporation. 

550.  Burden  of  proof  in  resisting  taxation. 

551.  Federal  tax  cannot  be  enjoined. 

552.  Remedy  against  tax  ofBcials. 

553.  Importance  of  speedy  remedy  in  taxation. 

xVPPENDIX, 

CONSTITUTION  OF  THE  UNITED  STATES,  p.  745. 
STATE  CONSTITUTIONS  ON  TAXATION,  p.  760. 


LAW  OF  TAXATION. 


CHAPTER    I. 

LIMITATIONS  UPON  STATE  TAXATION  GROWING  OUT  OF  THE 
RELATIONS  OF  THE  STATE  AND  FEDERAL  GOVERNMENTS. 

§    1.  Taxation  and  the  Constitution  of  the  United  States. 

2.  The  Constitution  in  relation  to  the  State  and  Federal  power  of 

taxation. 

3.  The  concurrent  powers  of  internal  taxation. 

4.  Judicial  construction  of  Federal  taxing  power. 

5.  Restraints  upon  State  taxation  developed  by  judicial  construction. 

6.  Importance  of  decision  in  McCulloch  v.  Maryland. 

7.  Opinion  in  McCulloch  v.  Maryland. 

8.  Osborn  v.  United  States. 

9.  Brown  v.  Maryland. 

10.  U.  S.  securities  not  taxable  by  States. 

11.  Legal  tender  notes,  etc.,  made  taxable  by  Act  of  Congress. 

12.  Bonds  of  District  of  Columbia  exempted. 

13.  Statutory  declaration  of  exemption  not  essential. 

14.  Salaries  of  U.  S.  officials  not  taxable. 

15.  State  tax  upon  passengers  in  mail  coaches  invalid. 

16.  Taxation  of  banks  holding  U.  S.  securities  invalid. 

17.  Corporate  franchise  tax  distinguished  from  property  tax. 

18.  Taxable  corporate  franchise  defined. 

19.  Taxation  of  shares  of  corporations  holding  Federal  securities. 

20.  State  tax  upon  interstate  passengers  invalid. 

21.  Lands  and  other  property  of  U.  S.  not  taxable  by  States. 

22.  Limitations  of  exemption  of  U.  S.  lands,  etc. 

23.  Lands  granted  to  railroads,  when  taxable. 

24.  The  title  essential  for  State  taxation. 

25.  Ores  from  mineral  lands  taxable. 

26.  Indian  Reservations  not  taxable. 

27.  Cattle,  etc.,  of  non-Indians  on  Indian  Reservations  taxable. 

28.  State  taxation  of  railroads  incorporated  by  United  States. 

29.  Railroad  franchises  granted  by  United  States  not  taxable. 

30.  Deflnition  of  U.  S.  franchise. 

31.  Intangible  and  tangible  property  of  railroads  incorporated  by  U.  S, 

taxable. 

(1) 


2  UNITED    STATES   AGENCIES   AND   PROPERTY.  §   1 

§  32.  Letters  patent  and  copyrights. 

33.  Corporate  capital  invested  iu  patent  rights. 

34.  State  tax  on  bequests  to  U.  S. 

35.  U.  S.  securities  not  exempt  from  State  inheritance  tax. 

36.  Treaty-making  power  aud  State  taxation. 

37.  Tax  evasion  through  investments  in  D.  S.  securities. 

38.  Payment  of  State  taxes  in  coin  sustained. 


§  1.  Taxation  and  the  Constitution  of  tlie  United  States. 

The  power  to  tax  has  been  defined  as  the  power  in  the 
State  to  enforce  proportional  contributions  from  persons 
and  property  for  the  support  of  the  government  and  for 
all  public  needs.  This  power  is  therefore  essential  to  the 
existence  of  an  organized  political  community.  In  the  lan- 
guage of  the  Supreme  Court  in  a  recent  case,^  involving 
the  power  of  taxation  delegated  to  Congress  by  the  Con- 
stitution: "  The  power  to  tax  is  the  one  great  power  upon 
which  the  whole  national  fabric  is  based.  It  is  as  neces- 
sary to  the  existence  and  prosperity  of  a  nation  as  is  the 
air  he  breathes  to  the  natural  man.  It  is  not  only  the 
power  to  destroy,  but  it  is  also  the  power  to  keep  alive," 

The  original  thirteen  States,  when  they  became  independ- 
ent Commonwealths  after  the  declaration  of  independence, 
exercised  this  sovereign  power  of  taxation  unrestricted  by 
any  external  authority.  It  was  the  absence  of  this  power 
in  the  Congress  of  the  Confederation,  and  its  inability  to 
enforce  payment  by  the  States  of  its  requisitions  upon 
them,  which  brought  about  the  failure  of  the  Confedera- 
tion, and  was  one  of  the  moving  causes  in  the  organization 
of  the  Federal  Union,  under  the  Constitution  of  the  United 
States. 

This  fatal  defect  in  the  Articles  of  Confederation,  the 
inability  of  Congress  to  enforce  the  collection  of  its  reve- 
nues, was  remedied  in  the  Constitution  by  giving  Congress  a 

1   Nicol  V.  Ames,  173  U.  S.  1.  c.  515. 


§  2  UNITED    STATES    AGENCIES    AND    PROPERTY.  3 

power  of  taxation,  exclusive  as  to  imports,  and  concuiTent 
with  the  States  in  internal  taxation,  dealing  directly  in  both 
with  the  subjects  of  taxation.^ 

§  2.  The  Constitution  in  relation  to  the  State  and  Federal 
power  of  taxation. 

As  the  government  of  the  United  States,  under  the  Con- 
stitution, is  one  of  delegated  powers.  Congress  has  only 
such  taxing  power  as  the  Constitution  delegates  to  it ;  while 
the  States  retain  their  original  powers  of  taxation,  subject 
to  the  restrictions  which  the  same  instrument  imposes  upon 
them.  Thus  the  Constitution  acts  in  the  one  case  as  a 
grant,  and  in  the  other  as  a  restraint  of  power.  It  is  true 
that  the  original  State  sovereignty  in  taxation  was  never 
possessed  by  the  States  later  admitted  into  the  Union,  in 
the  same  sense  as  by  the  original  thirteen.  But  this  rela- 
tion of  the  States  to  the  Federal  government  established 
by  the  Constitution  is  assumed  without  distinction  by  all 
the  States  admitted  to  the  Union,  on  the  same  basis  as  it 
existed  between  the  original  thirteen  States  and  the  central 
government;  for,  under  the  Constitution,  all  the  powers 
not  delegated  to  the  United  States  by  the  Constitution  are 
reserved  to  the  States  respectively,  or  to  the  people. ^  It 
was  said  by  the  Supreme  Court  in  a  notable  case:"  "A 
State  in  the  ordinary  sense  of  the  Constitution  is  a  politi- 
cal community  of  free  citizens,   occupying  a  territorv  of 


1  Thus  Mr.  Hamilton  said  in  the  Federalist,  No.  16:  "The  government 
of  the  Union,  like  that  of  each  State,  must  be  able  to  address  itself  im- 
mediately to  the  hopes  and  fears  of  individuals;  aud  to  attract  to  its 
support  those  passions  which  have  the  strongest  influence  upon  the 
human  heart.  It  must,  in  short,  possess  all  the  means  and  have  a  right 
to  resort  to  all  the  methods,  of  executing  the  powers  with  which  it  is 
intrusted,  that  are  possessed  and  exercised  by  the  governments  of  the 
particular  States." 

2  Constitution,  Amendment  X. 

3  Texas  v.  White^  7  Wall.  1.  c.  721. 


4  UNITED    STATES    AGENCIES   AND   PROPERTY.  §   2 

defined  boundaries  and  organized  under  a  government 
sanctioned  and  limited  by  a  written  constitution,  and  estab- 
lished by  the  consent  of  the  governed.  It  is  the  union  of 
such  States  under  a  common  constitution, which  forms  the 
distinct  and  greater  political  unit,  which  that  Constitution 
designates  as  the  United  States,  and  makes  of  the  people 
and  States  which  compose  it  one  people  and  one  country." 

And  again  the  court  said :  ' '  Equality  of  constitutional 
right  and  power  is  the  condition  of  all  the  States  of  the 
Union,  old  and  new."  ^  It  was  decided  in  that  case 
that  the  ordinance  of  1787,  for  the  government  of  the 
Northwestern  Territory,  and  the  resolution  admitting  the 
State  of  Illinois  into  the  Union,  could  not  control  the  pow- 
ers and  authority  of  the  State  after  her  adinission,  and 
that  on  her  admission  she  at  once  ' '  became  entitled  to  and 
possessed  of  all  the  rights  of  dominion  and  sovereignty 
which  belonged  to  the  original  States." 

Subject  to  the  restraints  imposed  by  the  Constitution, 
and  those  growing  out  of  the  relations  thereby  created,  the 
States  retain  their  original  taxing  power,  or  more  accur- 
ately, all  the  States  hold  subject  to  such  restrictions  the 
sovereign  taxing  power,  which  the  original  thirteen  States 
exercised  prior  to  the  adoption  of  the  Constitution.''^  The 
constitutional  basis  of  internal  taxation  in  the  United  States, 
therefore  rests  upon  the  concurrent  exercise  by  two  sov- 
ereignties of  the  power  of  taxation  over  the  same  subjects 
and  in  the  same  territory.  The  exercise  by  the  States  of 
their  original  power  is  subject,  however,  to  a  further  quali- 
fication arising  out  of  the  supremacy  of  the  Constitution, 
laws  and  treaties  of  the  United  States,  which  are  made  by 
the  Constitution  the  supreme  law  of  the  land.' 


1  Escanaba  Company  v.   Chicago,  107  U.   S.  678.     See  also  Huse  t;. 
Glover,  119  U.  S.  543. 

2  1  Story  on  Cons.,  Sec.  940. 

3  Article  VI.,  Section  2,  of  the  Constitation. 


§    3  UNITED  STATES    AGENCIES    AND    PROPERTY.  5 

§  3.  The  concurrent  powers  of  internal  taxation. 

When  tEe  Constitution  was  adopte'd,  or,  in  the  words  of 
John  Quincy  Adams,  "  extorted  from  the  grinding  neces- 
sity of  a  rehictant  people,"  this  grant  to  the  Federal  gov- 
ernment of  a  concurrent  power  over  internal  taxation  was 
jealously  and  stoutly  resisted.  The  exclusive  jurisdiction 
of  the  Federal  government  over  imports  and  customs  duties 
seems  to  have  been  recognized  as  a  necessity,  but  internal 
taxation,  it  was  claimed,  should  be  left  to  the  States,^  or  the 
people  would  be  oppressed  by  an  army  of  Federal  tax  col- 
lectors and  crushed  by  the  weight  of  this  double  taxation 
by  the  State  and  Federal  authority.  The  Constitution  con- 
tains no  express  limitation  upon  the  taxing  power  of  the 
States  except  as  to  imports  and  exports,  and  its  defenders, 
notable  among  them  Mr.  Hamilton  in  the  Federalist,  con- 
tended that  this  left  the  power  of  the  States  over  internal 
taxation  unrestrained.  Thus  he  said  concerning  the  sup- 
position that  the  taxing  power  of  the  States  was  repugnant 
to  that  of  the  Union  :  '-*  — 

"  It  cannot  be  supported  in  that  sense  which  would  be 
requisite  to  work  an  exclusion  of  the  States.  It  is,  indeed, 
possible  that  a  tax  might  be  laid  on  a  particular  article  by 
a  State,  which  might  render  it  inexpedient  that  thus  a  fur- 
ther tax  should  be  laid  on  the  same  article  by  the  Union ; 
but  it  would  not  imply  a  constitutional  inability  to  impose 
a  further  tax.  The  quantity  of  the  imposition,  the  expe- 
diency or  inexpediency  of  an  increase  on  either  side,  would 
be  mutually  questions  of  prudence ;  but  theiH3  would  be  in- 
volved no  direct  contradiction  of  power.  The  particular 
policy  of  the  national  and  of  the  State  systems  of  finance 
might  now  and  then  not  exactly  coincide  and  might  require 

1  See  2  Thorp's  Constitutional  History  of  the  United  States,  Book  III, 
for  an  interesting  account  of  the  arguments  for  and  against  the  Constitu- 
tion.    See  also  Federalist,  Nos.  30  to  36. 

2  Federalist,  No.  32. 


6  UNITED    STATES    AGENCIES   AND    PROPERTY.  §  4 

reciprocal  forbearances.  It  is  not,  however,  a  mere  possi- 
bility of  inconvenience  in  the  exercise  of  powers,  but  an 
immediate  constitutional  repugnancy  that  can  by  implica- 
tion alienate  and  extinguish  a  preexisting  right  of  sov- 
ereignty." ^ 

§  4.  Judicial  construction  of  Federal  taxing  power. 

The  attention  of  the  fathers  in  framing  the  Constitution 
was  therefore  not  directed  to  the  restraint  upon  the  tax- 
ing power  of  the  States  growing  out  of  the  relations  be- 
tween the  States  and  the  Federal  government,  for  no  one 
then  foresaw  the  tremendous  expansion  of  the  national 
commerce  and  of  the  functions  of  the  Federal  government 
but  their  attention  was  directed  to  restraints  upon  the  Fed- 
eral taxing  power.  This  jealousy  of  the  Federal  govern- 
ment occasioned  the  only  express  restrictions  upon  its 
taxing  power,  to  wit,  the  provision  that  direct  taxes  shall 
be  apportioned  according  to  population,  the  requirement  of 
uniformity  as  to  all  duties,  imposts  and  excises,  and  the 
prohibition  of  a  tax  upon  exports  from  any  State,  or  any 
preference  between  ports  of  the  States.^ 

After  more  than  a  century  of  government  under  the  Con- 
stitution, the  Supreme  Court  was  unable  to  agree  upon  a 
construction  of  any  one  of  these   three   restrictions.     It 

1  Mr.  Hamilton  in  Federalist,  No.  36,  in  answer  to  the  argument  that 
there  would  be  "  double  sete  of  oflQcers  "  for  internal  taxation,  says  that 
probably  "  the  United  States  will  either  wholly  abstain  from  the  objects 
preoccupied  for  local  purposes  or  will  make  use  of  the  State  ofBcers  and 
State  regulations  for  collecting  the  additional  imposition."  He  inti- 
mated also  that  the  expenses  of  the  States  would  probably  be  small  and 
that  only  a  small  land  tax  would  be  required  for  their  purposes  after  their 
then  outstanding  debts  were  paid.  This  discussion  of  the  Federalist  as 
to  the  concurrent  power  of  taxation  was  used  in  McCulloch  v.  Maryland 
in  support  of  the  argument  in  favor  of  the  power  of  the  State  to  tax  the 
branch  of  the  National  Bank;  see  reference  to  same  In  the  opinion  of 
Chief  Justice  Marshall,  infra,  §  7. 

-  See  Constitution,  Article  I.,  Sections  8  and  9. 


§  5  UNITED    STATES    AGEXCIES    AND    PROPERTY.  7 

was  decided  by  a  bare  majority  of  five  to  four  that  the  term 
"  direct  taxes  "  did  not  mean  what  it  had  been  construed  to 
mean  during  the  one  hundred  years  since  the  foundation  of 
the  government ;  ^  while  upon  the  application  of  the  uni- 
formity requirement  in  Federal  taxation  to  the  territorial 
acquisitions  of  the  country,  the  judges  were  unable  to  agree 
upon  any  opinion ;  ^  and  only  by  a  majority  of  one,  as  in 
the  Income  Tax  Case,  was  a  decision  rendered  as  to  what 
was  a  duty  upon  exports  or  a  preference  between  ports 
with  reference  to  these  same  territorial  acquisitions.'  This 
inability  of  the  eminent  jurists  of  the  Supreme  Court  to 
atrree  in  the  construction  and  application  of  these  provisions 
of  the  Constitution  forcibly  illustrates  not  onh^  the  com- 
plexity inherent  in  the  adjustment  of  the  concurrent  taxing 
powers  of  dual  sovereignties,  but  in  a  broader  sense  the 
inadequacy  of  a  wi'itten  constitution  when  confronted  with 
conditions  and  emergencies  never  contemplated  by  it^ 
framers. 

§  5.  Restraints  upon  State  taxation  developed  by  Judicial 
construction. 

While  the  taxing  power  of  the  States  is  thus  unrestrained 
bv  anv  express  constitutional  restrictions,  except  such  as 
are  involved  in  the  exclusive  power  over  foreign  commerce 
and  concurrent  power  in  internal  taxation  given  to  Con- 
gress, there  is  a  veiy  important  restraint  upon  it  arising 
out  of  the  necessary  relations  between  the  State  and  Fed- 
eral government  created  by  the  Constitution,  and  the  su- 
premacy of  the  Federal  power  which  the  Constitution 
established.  Thus  it  is  provided :  *  "  This  Constitution  and 
the  laws  of  the  United  States  which  shall  be  made  in  pur- 

1  Income  Tax  Cases,  157  U.  S.  429  and  158  U.  S.  601. 

2  Downes  v.  Bidwell,  182  U.  S.  244. 

3  Dooley  v.  United  States,  183  U.  S.  151. 

*  Article  VI.,  Section  2,  of  the  Constitution. 


8  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   6 

suance  thereof,  and  all  treaties  made,  or  which  shall  be 
made,  under  the  authority  of  the  United  States,  shall  be 
the  supreme  law  of  the  land ;  and  the  judges  in  every  State 
shall  be  bound  thereby,  anything  in  the  constitution  or 
laws  of  any  State  to  the  contrary  notwithstanding." 

There  is  no  provision  in  the  Federal  Constitution  pro- 
hibiting State  taxation  of  Federal  agencies  or  franchises, 
or  interstate  commerce,  or  protecting  from  taxation  prop- 
erty exempted  by  contracts  of  the  legislature ;  but  neither 
is  there  any  express  provision  in  the  Constitution  where- 
under  the  Federal  Supreme  Court  can  declare  an  Act  of 
Congress  or  of  a  State  legislature  void  as  violating  that 
instrument,  and  it  is  said  that  foreigners  have  searched  the 
Constitution  in  vain  to  find  a  recognition  of  this  power. ^ 
It  has  in  fact  been  developed  by  judicial  construction  from 
the  necessary  relation  between  the  legislative  power  and 
the  court  created  by  the  written  Constitution.^ 

Thus  also  by  judicial  construction  from  the  necessary  rela- 
tion between  the  power  of  State  taxation  and  the  supremacy 
of  the  Federal  authority,  the  great  volume  of  the  law  of  Fed- 
eral restraints  upon  State  taxation  has  been  developed  upon 
the  fundamental  principle  of  the  supremacy  of  the  Federal 
authority,  as  expounded  by  the  great  constructive  mind 
and  the  masterful  reasoning  of  Chief  Justice  Marshall. 

§  6.  Importance  of  decision  in  McCuUoch  v.  Maryland, 

The  decision  in  McCulloch  v.  Maryland,'^  decided  in  1819, 
is  the  foundation  of  the  great  principle  of  Federal  su- 
premacy in  taxation,  which  necessarily  involves  the  ex- 
emption from  State  taxation  of  the  agencies  of  the  Federal 
government.     The  question  before  the  court  was  the  valid- 

*    1  See  1  Bryce's  American  Common  wealthy  346. 
2  Marbury  v.  Madison,  4  Cranch,  110. 
8  4  Wheaton,  316. 


§   7  UNITED    STATES    AGENCIES    AND    PROPERTY.  9 

ity  of  a  statute  of  Maryland  requiring  the  notes  of  the 
branch  of  the  United  States  Bank  estabhshed  in  that  State 
to  be  issued  upon  stamped  paper,  subject  to  a  stamp  tax 
levied  by  the  State.  There  was  thus  at  issue  not  onl}^  the 
constitutional  power  of  Congress  to  establish  the  bank  and 
of  the  bank  to  establish  its  branches,  but  also  the  power  of 
the  State  to  tax  such  branches.  It  was  the  first  case  pre- 
sented to  the  court  involving  the  powers  impliedly  given 
by  the  Constitution  and  the  Federal  limitations  upon  the 
taxing  power  of  the  State  growing  out  of  the  relations 
between  the  Skites  and  the  Federal  government  created  by 
the  Constitution.  Counsel  for  the  State  of  Maryland 
argued  that  the  principle  of  concurrent  powers  in  internal 
taxation,  as  expounded  by  the  writers  in  the  Federalist, 
carried  with  it  the  right  on  the  part  of  the  States  to  tax 
the  agencies  of  the  Federal  government,  and  on  the  part  of 
the  Federal  government  to  tax  the  agencies  of  the  States. 

The  opinion  of  Chief  Justice  Marshall  is  justly  deemed 
one  of  the  greatest,  if  not  the  greatest,  of  that  great  jurist, 
as  it  certainly  is  the  most  far-reaching  in  its  consequences, 
dealing  as  it  does  with  the  limitations  of  the  sovereign 
power  of  both  Federal  and  State  governments.  It  is 
notable,  as  are  others  of  his  opinions,  in  that  it  cites  no 
authorities,  for  there  were  none  to  cite.^ 

§  7    Opinion  in  McCulloch  v.  Maryland. 

After  holding  that  Congress  had  the  constitutional  power 
to  establish  the  bank  and  the  bank  the  right  to  establish 

1  The  report  says :  "  This  case  involving  a  constitutional  question  of 
great  public  importance,  and  the  sovereign  rights  of  the  United  States 
and  the  State  of  Maryland,  and  the  government  of  the  Unittd  Slates 
having  directed  their  Attorney- General  to  appear  for  the  plaintiff  in 
error,  the  court  dispensed  with  its  general  rule,  permitting  only  two 
counsel  to  argue  for  each  party."  The  case  was  argued  by  Mr.  Webster, 
Mr.  Pinckney  and  Attorn-^y-General  Wirt  for  the  United  States  Bank,  and 
by  Mr.  Hopkinsoii,  Mr.  Jones  and  Attoruey-General  Martiu  for  the  State. 


10  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   7 

its  branch  in  the  State,  it  was  held  further  that  the  State, 
within  which  the  branch  was  located,  could  not,  without 
violating  the  Constitution,  tax  that  branch.  The  State 
eovernment  had  no  riorht  to  tax  any  of  the  constitutional 

O  CD  ^ 

means  employed  by  the  government  to  execute  its  constitu- 
tional powers,  and  no  power  by  taxation  or  otherwise  to 
retard,  impede,  burden  or  in  any  manner  control  the 
operation  of  the  constitutional  laws  enacted  b}^  Congress  to 
cany  into  effect  the  powers  vested  in  the  national  govern- 
ment.    Thus  he  said :  — 

"  That  the  power  of  taxation  is  one  of  vital  importance ; 
that  it  is  retained  by  the  States ;  that  it  is  not  abridged  by 
the  grant  of  a  similar  power  to  the  government  of  the 
Union ;  that  it  is  to  be  concurrently  exercised  by  the  two 
governments :  are  truths  which  have  never  been  denied. 
But,  such  is  the  paramount  character  of  the  Constitution 
that  its  capacity  to  withdraw  any  subject  from  the  action 
of  even  this  power,  is  admitted."  After  conceding  that 
there  was  no  express  prohibition  of  such  a  tax  in  the  Con- 
stitution, the  court  says :  — 

"There  is  no  express  provision  for  the  case,  but  the 
claim  has  been  sustained  on  a  principle  which  so  entirely 
pervades  the  Constitution,  is  so  intermixed  with  the  mate- 
rials which  compose  it,  so  interwoven  with  its  web,  so 
blended  with  its  texture,  as  to  be  incapable  of  being  sep- 
arated from  it  without  rending  it  into  shreds." 

And  further,  page  431 :  — 

' '  That  the  power  to  tax  involves  the  power  to  destroy ; 
that  the  power  to  destroy  may  defeat  and  render  useless 
the  power  to  create;  that  there  is  a  plain  repugnance,  in 
conferring  on  one  government  a  power  to  control  the  con- 
stitutional measures  of  another,  which  other,  with  respect 
to  those  very  measures,  is  declared  to  be  supreme  over 
that  which  exerts  the  control,  are  propositions  not  to  be 
denied.     *     *     *     jf  tj^e  States  may  tax  one  instrument, 


§    7  UNITED    STATES    AGENCIES    AND    PROrERTY.  11 

employed  by  the  government  in  the  execution  of  its  powers, 
they  may  tax  any  and  every  other  instrument.  The}'^  may 
tax  the  mail ;  they  may  tax  the  mint ;  they  may  tax  patent 
rights ;  they  may  tax  the  papers  of  the  custom  house ; 
they  may  tax  judicial  process;  they  may  tax  all  the  means 
employed  by  the  government,  to  an  excess  which  would 
defeat  all  the  ends  of  government.  This  was  not  intended 
by  the  American  people.  They  did  not  design  to  make 
their  government  dependent  on  the  States.  *  *  *  xhe 
question  is,  in  truth,  a  question  of  supremacy;  and  if  the 
right  of  the  States  to  tax  the  means  employed  by  the  gen- 
eral government  be  conceded,  the  declaration  that  the  Con- 
stitution, and  the  laws  made  in  pursuance  thereof,  shall  be 
the  supreme  law  of  the  land,  is  empty  and  unmeaning 
declamation." 

Reference  was  made  in  the  opinion  to  the  arguments  of 
the  Federalist,  and  it  was  held  that  they  were  intended  to 
prove  the  fallacy  of  apprehensions  of  an  unlimited  power 
of  taxation.     He  said:  — 

*'  Had  the  authors  of  these  excellent  essays  been  asked, 
whether  they  contended  for  that  construction  of  the  Con- 
stitution, which  would  place  within  the  reach  of  the  States 
those  measures  which  the  government  might  adopt  for  the 
execution  of  its  powers ;  no  man,  who  has  read  their  in- 
structive pages,  will  hesitate  to  admit  that  their  answer 
must  have  been  in  the  negative." 

He  said  further  that  the  right  of  the  State  to  tax  the 
banks  chartered  by  the  general  government  was  not  the 
same  as  the  right  of  the  national  government  to  tax  the 
banks  chartered  by  the  State :  — 

"  The  difference  is  that  which  always  exists,  and  always, 
must  exist,  between  the  action  of  the  whole  on  a  part,  and 
the  action  of  a  part  on  the  whole — between  the  laws  of  a 
government  declared  to  be  supreme,  and  those  of  a  govern- 


12  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   8 

ment  which,  when  in  opposition  to  those  laws,  is  not 
supreme . ' ' 

The  opinion  concluded  as  follows,  pp.  436,  437  :  — 

*'  The  court  has  bestowed  on  this  subject  its  most  delib- 
erate consideration.  The  result  is  a  conviction  that  the 
States  have  no  power,  by  taxation  or  otherwise,  to  retard, 
impede,  burden,  or  in  any  manner  control  the  operations  of 
the  constitutional  laws  enacted  by  Congress  to  carry  into 
execution  the  powers  vested  in  the  general  government. 
This  is,  we  think,  the  unavoidable  consequence  of  that 
supremacy  which  the  Constitution  has  declared. 

"  We  are  unanimously  of  the  opinion  that  the  law  passed 
by  the  legislature  of  Maryland,  imposing  a  tax  on  the  Bank 
of  the  United  States,  is  unconstitutional  and  void. 

"  This  opinion  does  not  deprive  the  States  of  any  re- 
sources which  they  originally  possessed.  It  does  not  ex- 
tend to  a  tax  paid  by  the  real  property  of  the  bank,  in 
common  with  the  other  real  property  within  the  State,  nor 
to  a  tax  imposed  on  the  interest  which  the  citizens  of  Mary- 
land may  hold  in  this  institution,  in  common  with  other 
property  of  the  same  description  throughout  the  State. 
But  this  is  a  tax  on  the  operations  of  the  bank,  and  is  con- 
sequently a  tax  on  the  operation  of  an  instrument  employed 
by  the  government  of  the  Union  to  carry  its  powers  into 
execution.     Such  a  tax  must  be  unconstitutional." 

§  8.   Osborn  v.  United  States. 

A  few  years  later,  in  1824,  the  court  was  asked  ^  to  recon- 
sider so  much  of  this  opinion  as  held  that  the  States  had  no 
rightful  power  to  tax  the  banks  of  the  United  States.  It 
was  contended  that  banking  is  a  private  business,  the 
essential  character  of  which  was  not  changed  by  the  fact 
that  the  parties  engaging  therein  were  incorporated  under 

1  Osborn  v.  Bank  of  the  United  States,  9  Wheaton,  738. 


§  9  UNITED    STATES   AGENCIES   AND   PROPERTY.  13 

the  Act  of  Congress,  and  it  was  therefore  not  properly  an 
instrumentality  of  the  government  in  the  sense  that  the 
mint  or  post  office  was.  But  the  court  replied  that  while 
banking  was  a  private  business,  the  Bank  of  the  United 
States  was  not  created  for  its  own  sake  or  for  private  pur- 
poses, and  to  tax  its  facilities,  its  trade  and  occupation,  was 
to  tax  the  bank  itself.  The  tax  in  this  case  was  one  levied 
by  the  State  of  Ohio  taxing  the  banks  of  the  United  States 
fifty  dollars  on  each  office  of  discount  and  deposit  in  the 
State.     The  court  said,  1.  c,  page  867  :  — 

"  Considering  the  capacity  of  carrying  on  the  trade  of 
banking,  as  an  important  feature  in  the  character  of  this 
corporation  which  was  necessary  to  make  it  a  fit  instrument 
for  the  objects  for  which  it  was  created,  the  court  adheres 
to  its  decision  in  the  case  of  McCulloch  v.  Maryland,  and 
is  of  opinion  that  the  act  of  the  State  of  Ohio,  which  is 
certainly  much  more  objectionable  than  that  of  the  State 
of  Maryland,  is  repugnant  to  a  law  of  the  United  States 
made  in  pursuance  of  the  Constitution,  and  therefore 
void." 

§  9.  Brown  v.  Maryland. 

This  principle  of  Federal  supremacy  in  relation  to  the 
taxing  power  of  the  States  was  again  emphatically  stated 
in  1827,  in  the  great  case  of  Brown  v.  Maryland.^ 
In  answer  to  the  argument  that  the  construction  given  by 
the  court  to  the  power  to  regulate  commerce  would  abridge 
the  power  of  the  State  to  tax  its  own  citizens  or  their 
property  within  its  territory,  the  court,  Chief  Justice 
Marshall,  said,  page  448:  — 

' '  We  admit  this  power  to  be  sacred ;  but  cannot  admit 
that  it  may  be  used  so  as  to  obstruct  the  free  course  of  a 
power  given  to  Congress.     We  cannot  admit  that  it  may  be 

1  12  Wheaton,  419. 


14  UNITED    STATES    AGENCIES    AND    PROPERTY.  §    10 

used  so  as  to  obstruct  or  defeat  the  power  to  regulate  com- 
merce. It  has  been  observed  that  the  powers  remaining 
with  the  States  ma}^  be  so  exercised  as  to  come  in  conflict 
with  those  vested  in  Congress.  When  this  happens,  that 
which  is  not  supreme  must  yield  to  that  which  is  supreme. 
This  great  and  universal  truth  is  inseparable  from  the 
nature  of  things,  and  the  Constitution  has  applied  it  to  the 
often  interfering  powers  of  the  general  and  State  govern- 
ments, as  a  vital  principle  of  perpetual  operation.  It 
results  necessarily  from  this  principle  that  the  taxing 
power  of  the  States  must  have  some  hmits.  It  cannot 
reach  and  restrain  the  action  of  the  national  government 
within  its  proper  sjihere.  It  cannot  reach  the  administra 
tion  of  justice  in  the  courts  of  the  Union,  or  the  collection 
of  the  taxes  of  the  United  States,  or  restrain  the  operation 
of  any  law  which  Congress  may  constitutionally  pass.  It 
cannot  interfere  with  any  regulation  of  commerce. 

§  10.  United  States  securities  not  taxable  by  States. 

This  principle  was  first  applied  to  the  attempted  State 
taxation  of  Federal  securities  in  1829,  in  Weston  v. 
Charleston.  1 

The  city  of  Charleston  passed  an  ordinance,  taxing,  with 
other  personal  effects,  the  six  and  seven  per  cent  stock  of 
the  United  States,  25  cents  on  every  $100.  This  tax  hav- 
ing been  sustained  by  the  State  courts  of  the  State,  was 
taken  to  the  Supreme  Court  of  the  United  States  and  there 
adjudged  unconstitutional.  It  was  claimed  that  a  tax  on 
stock  came  within  the  exception  stated  in  the  case  of  Mc- 
Culloch  V.  Maryland,  but  the  court  held  the  contrary,  say- 
ing, 1.  c,  page  468  :  — 

"The  American  people  have  conferred  the  power  of  bor- 
rowing money  on  their  government,  and  by  making  that 

1  2  Peters,  450;   7  L.  C  P.  481. 


§    11  UNITED    STATES    AGENCIES    AND    PROPERTY.  15 

government  supreme,  have  shielded  its  action,  in  the  ex- 
ercise of  this  power,  from  the  action  of  the  local  govern- 
ments. The  grant  of  the  power  is  incompatible  with  a 
restraining  or  controlling  power,  and  the  declaration  of 
supremacy  is  a  declaration  that  no  such  restraining  or 
controlling  power  shaU  be  exercised."^ 

§  11.  Legal  tender  notes,  etc.,  made  taxable  by  Act  of  Con- 
gress. 

The  principle  thus  established  was  applied  to  certificates 
of  indebtedness  issued  by  the  United  States  to  creditors 
of  the  government  for  supplies  furnished  to  aid  in  carrying 
on  the  Civil  War;  ^  also  to  United  States  notes,  that  is, 
treasury  notes  or  greenbacks  constituting  the  circulating 
medium  of  the  country,  as  these  were  held  to  be  engage- 
ments to  pay  dollars  and  therefore  obligations  of  the  na- 
tional government  and  exempt  from  State  taxation.^  Gold 
and  silver  certificates  issued  by  the  government,*  and  the 
notes  issued  by  national  banks,  organized  under  Act  of 
Congress,  were  also  held  thus  exempt. °  But  this  exemp- 
tion of  national  bank  notes  and  United  States  legal  tender 
notes  and  certificates  of  the  United  States,  circulating  as 
currency,  was  repealed  by  Act  of  Congress  in  181)4.^ 

1  Justices  Johnson  and  Thompson  dissented,  the  former  saying,  1.  c. 
p.  473:  "Why  should  not  the  btock  of  the  United  States,  when  it  be- 
comes mixed  up  with  the  capital  of  its  citizens,  become  subject  to  taxa- 
tion in  common  with  other  capital?  Or  why  should  one  who  enjoys  all 
the  advantages  of  a  society  purchased  at  a  heavy  expense  and  lives  in 
affluence  upon  an  income  derived  exclusively  from  interest  on  govern- 
mental stock,  be  exempted  from  taxation?" 

2  The  Banks  v.  The  Mayor,  7  Wall.  16. 
8  Bank  v.  Supervisors,  7  Wall.  26. 

*  State  V.  Mayor,  63  N.  J.  L.  647. 

5  See  Horn  v.  Green,  52  Miss.  452;  but  contra  Montgomery  County 
Commissioners  v.  Elston,  32  Ind.  27;  Ruffiu  v.  B.  of  Com.,  69  N.  C.  498. 

6  Act  of  August  13,  1894,  providing  "  that  circulating  notes  of  national 
banking  associations  and  United  States  legal  tender  notes  and  other 
notes  and  certificates  of  the  United  States  payable  on  demand  and  cir- 
culating or  intended  to  circulate  as  currency  and  gold,  silver  or  other 


16  UNITED    STATES    AGENCIES    AND    PROPERTY.  §    12 

§  12.  Bonds  of  District  of  Columbia  exempted. 

Bonds  issued  by  the  District  of  Columbia  under  author- 
ity of  Act  of  Congress,  which  were  to  be  paid  in  part  by 
taxation  of  property  within  the  District  and  in  part  by 
appropriations  of  Congress,  were  held,  to  be  lawfully  ex- 
empted by  Congress  from  taxation  by  State  or  municipal 
authority.^  It  was  contended  that  Congress  had  no  power 
to  declare  this  exemption.  But  the  court  held,  in  an  in- 
teresting opinion  by  Judge  Taft,  after  careful  review  of  the 
authorities,  that  where  Congress  lawfully  directs  the  issue 
of  evidences  of  indebtedness  in  the  exercise  of  any  power 
derived  by  it  from  the  Constitution,  whether  it  be  by  vir- 
tue of  the  power  to  borrow  money  on  the  credit  of  the 
United  States,  or  any  other  grant,  such  evidences  of  debt 
are  exempt  from  State  taxation,  or  at  least  may  be  ex- 
empted therefrom,  if  Congress  sees  fit  to  give  them  this 
quality.  The  suit  was  upon  municipal  bonds  issued  to 
borrow  money  to  pay  the  debts  incurred  in  improving  and 
beautifying  the  city  of  Washington,  the  capital  of  the 
nation.  The  court  held  that  the  bonds,  so  authorized  by 
Congress,  were  issued  for  an  essentially  national  purpose, 
and  that  in  effecting  that  purpose  by  means  of  the  express 
constitutional  power  to  borrow  money  on  the  credit  of  the 
United  States,  the  legislative  power  of  Congress  in  thus 
exempting  them  was  as  territorially  extensive  as  the  exer- 
cise of  the  power  for  any  other  constitutional  purpose. 
Hence  it  operated  in  each  State  upon  the  taxing  officers 
of  the  State  and  upon  the  government  thereof,  and  ex- 
pressly forbade  the  taxation  of  the  bonds. 

coin,  shall  be  subject  to  taxation  as  money  on  hand  or  on  deposit,  under 
the  laws  of  any  State  or  Territory :  Provided^  that  any  such  taxation 
t<hall  be  exercised  in  the  same  manner  and  at  the  same  rate  that  any  such 
State  or  Territory  shall  tax  money  or  currency  circulating  as  money  within 
its  jurisdiction,"  It  was  also  provided  that  the  act  should  not  change 
the  laws  relating  to  the  taxation  of  national  bank  shares.  See  infra,  §  264. 
1  Grether  v.  Wright,  23  C.  C.  A.  498. 


§    14  UNITED    STATES    A&ENCIES    AXD    PROPERTY.  17 

§  13.  Statutory  declaration  of  exemption  not  essential. 

It  has  been  customary  in  acts  authorizing  the  i«sue  of 
obligations  of  the  United  States  to  expressly  declare  such 
securities  exempt  from  State  taxation.  But  such  statutory 
enactment  or  declaration  is  not  the  foundation  of  the  ex- 
emption. It  is  based  upon  the  essential  relation  borne  by 
the  government  of  the  United  States  to  the  States.  The 
exemption,  therefore,  grows  out  of  the  character  of  the 
securities  and  their  relation  to  the  national  government, 
and  does  not  depend  upon  any  specific  declaration  in  the 
act  authorizing  their  issue. 

§  14.  Salaries  of  U.  S.  officials  not  taxable. 

In  1842  the  same  principle  was  applied  to  the  case  of  an 
officer  of  the  United  States  in  Dobbins  v.  Erie  County .^ 
The  State  of  Pennsjdvania  assessed  a  tax  on  all  offices  and 
posts  of  profit,  and  the  attempt  was  made  to  collect  it  from 
the  captain  of  a  United  States  revenue  cutter  at  the 
station  on  Lake  Erie.  The  Supreme  Court  of  Pennsylvania 
sustained  this  tax  and  distinguished  the  case  from  "Weston 
V.  Charleston  and  McCulloch  v.  IVIaryland,  on  the  ground 
that  the  officer  was  a  taxable  person.  But  the  Supreme 
Court  of  the  United  States,  in  an  opinion  by  Justice 
Wayne,  held  that  there  was  no  di-stinction.  The  affairs  of 
the  national  government  are  necessarily  carried  on  by 
agents  who  must  be  compensated,  and  if  the  State  could 
tax  the  salaries  of  such  agents,  it  would  in  effect  give  the 
State  a  revenue  out  of  the  United  States  and  would  reduce 
the  compensation  fixed  by  the  United  States  to  below  what 
it  adjudged  was  reasonable  for  the  service. 


1  Van  Brocklin  v.  Tennessee,  117  U.  S.  151. 

2  IG  Peters,  435,  and  10  L.  C.  P.  1022.  See  also  Ulsh  u.  Perry  County, 
7  Pa.  Dist.  Rep.  488,  holding  the  act  of  Pennsylvania  of  April  16,  1834, 
taxing  a  postal  clerk,  invalid. 


18  UNITED    STATES    AGENCIES    AND    PROPERTY.  §    16 

§  15.  State  tax  upon  passengers  in  mail  coaches  invalid. 

The  Cumberland  road  was  constructed  by  the  Federal 
government  through  the  States  of  Maryland,  Virginia, 
Pennsylvania  and  Ohio.  Acts  were  passed  by  the  several 
States,  and  accepted  by  the  United  States,  providing  that 
no  toll  should  be  received  or  collected  from  any  wagon  or 
carriage  employed  with  the  property  of  the  United  States, 
or  any  cannon  or  military  store  belonging  to  the  United 
States.  It  was  held  that  wherever  a  carriage  carried  the 
mail  upon  this  road,  although  it  carried  other  property  and 
passengers  also,  it  must  be  considered  to  be  laden  with  the 
property  of  the  United  States  and  therefore  exempted  from 
payment  of  State  toll.^ 

The  regulation  of  the  Post  Office  Department  required 
the  coaches  to  carry  passengers  for  the  security  of  the 
mails.  A  toll  of  four  cents  imposed  by  the  State  of  Mary- 
land upon  every  passenger  for  every  space  of  ten  miles  in 
the  passenger  or  mail  coaches  was  adjudged  inconsistent 
with  the  compact  made  with  the  United  States. ^ 

§  16.  Taxation  of  banks  holding  U.  S.  securities  invalid. 

In  Bank  of  Commerce  v.  New  York  City,  decided  in 
1862,^  the  principle  that  Federal  securities  are  exempt 
from  State  taxation,  laid  down  in  Weston  v.  Charleston,  was 
extended  to  banks  organized  under  the  laws  of  New  York, 
a  part  of  whose  stock  was  invested  in  Federal  securities. 
The  capital  of  the  bank  was  then  taxed  upon  a  valuation 
like  the  property  of  individuals,  and  the  court  held  that 
the  case  was  controlled  by  the  principle  of  the  "Weston 
case.     The  tax  was  therefore  adjudged  invalid  so  far  as  the 


1  Searight  v.  Stokes,  3  Howard,  151;  11  L.  C.  P.  537;  Neil  v.  Ohio,  3 
Howard,  720;  and  11  L.  C.  P.  800. 

2  Achison  v.  Huddleson,  12  Howard,  293;  and  13  L.  C.  P.  993. 

3  2  Black,  620. 


§    17  UNITED    STATES    AGENCIES    AND    PROPERTY.  19 

property  of  the  corporation  was  invested  in  United  States 
securities.  Subsequent  to  this  decision,  the  State  of  New 
York  enacted  another  statute  that  all  banks  should  be  sub- 
ject to  taxation  on  a  valuation  equal  to  the  amount  of  their 
capital  stock  paid  in,  or  subject  to  be  paid  in,  and  their 
surplus  earnings,  and  it  was  held  by  the  New  York  Court 
of  Appeals  that  this  did  not  impose  a  tax  upon  the  United 
States  securities  in  which  some  of  the  banks  had  invested 
all  and  others  a  part  of  their  capital.  But  the  Supreme 
Court  ^  held  that  the  tax  was  still  upon  the  Federal  securities ; 
that  the  tax  on  the  capital  and  surplus  was  a  tax  on  the 
property  of  the  bank,  and,  therefore,  upon  the  securities 
in  which  that  property  w^as  invested ;  that  it  was  not  upon 
the  franchise  of  banking  or  privilege  of  doing  a  banking 
business,  but  upon  the  property  of  the  bank,  i.  e.,  upon  the 
capital  representing  its  property. 

§  17.  Corporate  franchise  tax  distingruished  from  prop- 
erty tax. 

But  it  was  later  held  in  a  series  of  cases  reported  in  the 
6th  Wallace  that,  where  the  State  tax  was  upon  the  cor- 
porate franchise,  and  not  upon  the  property  of  the  corpo- 
ration or  upon  the  stock  as  representing  the  property,  the 
tax  was  not  invalidated  by  reason  of  the  investment  of  the 
property  of  the  corporation  in  exempted  Federal  securities. 
This  principle  was  applied  to  a  statute  of  Connecticut,  pro- 
viding that  savings  banks  should  pay  a  tax  of  three-fourths 
of  one  per  cent  on  their  deposits ;  ^  to  a  Massachusetts  tax 
which  was  levied  on  the  average  amount  of  deposits  during 
a  period  of  six  months ;  ^  and  to  a  Massachusetts  corpora- 
tion tax  *  which  required  all  corporations  having  a  caj^ital 

1  Bank  Tax  Case,  2  Wallace,  200. 

2  Society  for  Savings  v.  Coite,  6  Wallace,  694. 

8  Provident  Institution  v.  Massachusetts,  6  Wallace,  611. 
*  Hamilton  Company  v.  Massachusetts,  6  Wallace,  632.    Chief  Justice 
Chase  and  Justices  Grier  and  Miller  dissented  in  these  cases. 


20  UNITED    STATES    AGENCIES    AND    PROPERTY.  §    18 

atock  divided  into  shares  to  pay  a  tax  of  a  certain  percent- 
age upon  the  excess  of  the  cash  market  value  of  their  stock 
over  and  above  the  value  of  their  real  estate  and  machinery. 
In  this  last  case  the  tax  was  held  valid,  although  the  sur- 
plus capital  of  the  corporation  was  invested  in  exempted 
Federal  securities. 

This  distinction  was  aojain  brought  before  the  court  in 
the  case  of  a  New  York  statute  which  levied  a  tax  upon  the 
"corporate  franchise  or  business"  of  a  company,  at  the 
rate  of  one-quarter  of  a  mill  upon  the  capital  stock  for  each 
one  per  cent  of  dividend  of  six  per  cent  or  over ;  also  eight- 
tenths  of  one  per  cent  upon  the  premiums  of  fire  and 
marine  insurance  companies.  A  fire  insurance  company 
claimed  that  it  was  entitled  to  a  deduction  of  that  portion 
of  its  capital  invested  in  bonds  of  the  United  States.  This 
contention  was  overruled  by  the  New  York  Court  of 
Appeals, 1  and  its  judgment  was  at  first  afiirmed  in  the 
United  States  Supreme  Court  by  a  divided  court. ^  A  re- 
hearing was  granted,  the  case  reargued  and  the  judgment 
again  afiirmed.^ 

The  court  held  that  the  tax  was  not  levied  upon  the  capi- 
tal stock  nor  upon  the  bonds  of  the  United  States  composing 
a  part  of  the  stock,  and  that  it  was  properly  designated  as 
one  upon  the  corporate  franchises  or  business. 

§  18.  Taxable  corporate  franchise  defined. 

And  as  to  the  meaning  of  the  term  "  corporate  franchise 
or  business,"  the  court  said,  at  page  599 :  — 

"By  the  term  'corporate  franchise  or  business,'  as 
here  used,  we  understand  is  meant  (not  referring  to  cor- 
porations sole,  which  are  not  usually  created  for  commer- 

1  92  New  York,  328. 

2  Home  las.  Co.  v.  N.  Y.,  119  U.  S.  129. 

3  Home  Ins.  Co.  v.  N.  Y.,  134  U.  S.  594,  Justices  Miller  and  Harlan 
dissenting. 


§   18  UNITED    STATES    AGENCIES    AND    PROPERTY.  21 

cial  business)  the  right  or  privilege  given  b}^  the  State  to 
two  or  more  persons  of  being  a  corporation,  that  is,  of 
doing  busmess  in  a  corporate  capaoit}^  and  not  the  privi- 
lege or  franchise  which,  when  incorporated,  the  company 
may  exercise.  The  right  or  privilege  to  be  a  coi'poration, 
or  to  do  business  as  such  body,  is  one  generally  deemed  of 
value  to  the  corporators,  or  it  would  not  be  sought  in  such 
numbers  as  at  present.  It  is  a  right  or  privilege  by  which 
several  individuals  may  unite  themselves  under  a  common 
name  and  act  as  a  single  person,  with  a  succession  of  mem- 
bers, without  dissolution  or  suspension  of  business  and 
with  a  limited  individual  liability.  The  granting  of  such 
right  or  privilege  rests  entirely  in  the  discretion  of  the 
State,  and,  of  course,  when  granted,  may  be  accomf)anied 
with  such  conditions  as  its  legislature  may  judge  most  be- 
fitting to  its  interests  and  policy.  It  may  require,  as  a 
condition  of  the  grant  of  the  franchise,  and  also  of  its  con- 
tinued exercise,  that  the  corporation  pay  a  specific  sum  to 
the  State  each  year,  or  month,  or  a  specific  portion  of  its 
gross  receipts,  or  of  the  profits  of  its  business,  or  a  sum  to 
be  ascertained  in  any  convenient  mode  w^hich  it  may  pre- 
scribe. The  validity  of  the  tax  can  in  no  w^ay  be  dependent 
upon  the  mode  which  the  State  may  deem  fit  to  adopt  in 
fixing  the  amount  for  any  year  which  it  will  exact  for  the 
franchise.  No  constitutional  objection  lies  in  the  way  of  a 
legislative  body  prescribing  any  mode  of  measurement  to 
determine  the  amount  it  will  charge  for  the  privileges  it 
bestows.  It  may  well  seek  in  this  way  to  increase  its 
revenue  to  the  extent  to  which  it  has  been  cut  oE  by  exemp- 
tion of  other  property  from  taxation.  As  its  revenues  to 
meet  its  expenses  are  lessened  in  one  direction,  it  may  look 
to  any  other  property  as  sources  of  revenue,  which  is  not 
exempted  from  taxation.  Its  action  in  this  matter  is  not 
the  subject  of  judicial  inquiry  in  a  Federal  tribunal."  ^ 

»  See  also  §  30. 


22  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   20 

§  19.  Taxation  of  shares  of  corporations  holding  Fed- 
eral securities. 

As  will  be  hereafter  seen,  infra ^  §  274,  it  was  held  in  the 
case  of  the  national  banks,  that  as  the  act  of  Congress 
under  which  they  were  incorporated  authorized  the  taxation 
of  their  shares,  it  is  immaterial  that  their  capital  is  par- 
tially or  wholly  invested  in  United  States  bonds,  as  the  tax 
is  upon  the  individual  shares  and  not  upon  the  capital  or 
property  of  the  bank  as  such.  This  distinction,  or  rather 
the  judicial  recognition  of  the  fiction  distinguishing  the 
property  of  the  shareholders  from  the  property  of  the 
corporation,  has  also  been  applied  by  the  court,  as  will  be 
hereafter  seen,  in  reference  to  contracts  of  exemption  from 
taxation,  see  infra,  §  94. 

It  would  seem  that  the  same  principle  would  be  appli- 
cable to  the  case  of  any  Federal  securities  or  rights  of  prop- 
erty granted  by  the  United  States,  as  in  the  case  of  patent 
rights,  infra,  §  33,  and  that  the  tax  is  valid  if  levied  upon 
the  corporate  shares,  or  as  a  franchise  tax  upon  the  corpo- 
ration. A  ready  means  of  taxing  United  States  securities 
is  thus  afforded,  by  naming  the  tax  as  one  upon  the  fran- 
chise of  the  company,  or  uj^on  the  corporate  shares,  iu- 
stead  of  upon  the  propert}^  or  capital  of  the  corporation, 
although  in  fact  the  tax,  whatever  it  is  called,  is  upon  sub- 
stantially the  same  property,  in  both  cases. 

§  20.  State  tax  upon  interstate  passengers  invalid. 

In  Crandall  v.  Nevada,^  the  court  adjudged  invalid  a 
capitation  tax  levied  by  the  defendant  of  one  dollar  upon 
every  person  leaving  the  State  by  any  railroad,  stage  coach 
or  other  carrier,  to  be  paid  by  the  corporations  or  persons 
carrying  the  passengers.  The  court,  in  an  opinion  by  Jus- 
tice Miller,   expressed   regret   that  such  a  question   should 

1  6  Wallace,  35. 


§   21  UNITED    STATES    AGENCIES    AND    PROPERTY.  23 

be  submitted  to  it  with  no  l)rief  or  argument  on  the  part 
of  the  plaintiff  in  ^rror,  and  said  that  the  case  was  one  of 
importance,  for  it  involved  the  right  of  the  State  to  levy  a 
tax  upon  persons  residing  within  its  jurisdiction  who  might 
wish  to  go  out  of  it,  and  upon  persons  residing  out  of  it 
who  might  have  occasion  to  pass,  through  it.  The  statute 
was  adjudged  void,  not  because  it  was  a  violation  of  any 
specific  clause  of  the  Constitution,  although  two  of  the 
judges  based  their  concurrence  on  the  ground  that  it  was 
an  attempted  regulation  of  commerce,  but  because  it  was  a 
tax  inconsistent  with  the  relations  of  the  State  to  the  Fed- 
eral government.  The  United  States,  as  incident  to  the 
power  to  prosecute  and  declare  war,  has  a  right  to  raise 
and  transport  troops  through  and  over  the  territory  of 
any  State  of  the  Union.  The  citizens  of  each  State  have 
a  right  to  visit  the  seat  of  government,  to  have  free 
access  to  the  seaports  of  the  counfery  and  so  on,  and  this 
right  is  independent  of  the  law  of  any  State  over  whose 
soil  they  must  pass  in  the  exercise  of  it. 

§  21.  Lands    and    other  property  of   U.  S.  not  taxable 
by  States. 

It  may  be  said  in  general  terms  that  all  the  property 
of  the  United  States  held  for  Federal  purposes,  as  for 
public  buildings  or  reservations,  including  the  public 
domain,  is  exempt  from  State  taxation.^  But  this  exemp- 
tion no  longer  exists  when  the  right  to  a  conveyance  is 
secured  by  certificate  of  entry  or  purchase,  even  though  no 
patent  has  been  issued. ^  The  equitable  title  must,  however, 
be  fully  vested  without  any  more  to  be  paid  or  any  act  to 
be  done  going  to  the  foundation  of  the  right,  before  the 


1  Van  Brocklin  v.  Tennessee,  117  U.  S.  151. 

2  Witherspoon  v.  Duncan,  i  Wall.  210;  Carroll  v.  Safford,  3  Howard, 
441;  Railway  Co.  v,  Prescott,  16  Wallace,  603. 


24  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   21 

lands  can  become  taxable. ^  Until  a  Spanish  grant  has 
been  segregated  from  the  public  domain  by  survey  prop- 
erly approved,  it  is  not  subject  to  taxation  by  State 
authority.  2 

This  subject  of  the  exemption  of  property  of  the  United 
States  from  State  taxation  was  very  fully  discussed  in  Van 
Brocklin  v.  State  of  Tennessee.^  Lands  within  the  confines 
of  defendant  purchased  by  the  Federal  government  at  a 
sale  for  direct  taxes  levied  by  it  in  1862,  and  afterwards 
sold  by  it  or  redeemed  by  the  former  owner,  were  exempt 
from  State  taxation  while  held  by  the  United  States.^  The 
court  says  in  its  opinion  that  the  necessity  for  exempting 
all  the  property  of  the  United  States  from  State  taxation 
has  been  recognized  by  the  highest  courts  of  several  of  the 
States,  and  also  in  the  statutes  of  most  of  them.  It  re- 
marked, however,  that  such  a  provision  in  the  State  laws  is 
not  the  foundation  o#  the  exemption,  but  is  inserted  only 
from  abundant  caution  and  because  the  assessment  of  taxes 
is  to  be  made  by  local  officers  skilled  in  the  valuation  of 
property,  but  ignorant  of  legal  distinctions.^  The  gen- 
eral principle  is  thus  laid  down  at  pages  174  and  175  :  — 

"  In  short,  under  a  republican  form  of  government,  the 
whole  property  of  the  State  is  owned  and  held  by  the  State 
for  public  uses,  and  is  not  taxable,  unless  the  State  which 
owns  and  holds  it  for  those  uses  clearly  enacts  that  it  shall 
share  the  burden  of  taxation  with  other  property  within  its 
jurisdiction.  Whether  the  property  of  one  of  the  States 
of  the  Union  is  taxable  under  the  laws  of  that  State  de- 


1  Railway  Co.  v.  Prescott,  16  Wallace,  603;  Wisconsin  Central  Rail- 
road Co.  V.  Price  County,  133  U.  S.  496. 

2  Rpbertson  v.  Sewell,  31  C.  C.  A.  107. 

3  117  U.  S.  151. 

4  But  after  sale  under  a  confiscation,  the  lands  are  subject  to  State 
taxation,  see  Newby  v.  Brownlee,  23  Fed.  Rep.  320. 

5  Page  171,  wiiere  there  is  a  statement  of  the  express  exemption  of 
property  of  the  United  States  in  the  general  tax  acts  of  each  State. 


§   22  UNITED    STATES    AGENCIES    AND    PROPERTY.  25 

pends  upon  the  intention  of  the  State  as  manifested  by 
those  laws.  But  whether  the  property  of  the  United 
States  shall  be  taxed  under  the  laws  of  a  State  depends 
upon  the  will  of  its  owner,  the  United  States,  and  no  State 
can  tax  the  property  of  the  United  States  without  their 
consent." 

And  the  general  power  of  the  United  States  in  the  acqui- 
sition of  lands  in  a  State  is  thus  stated  at  page  154 :  — 

"  So  the  United  States,  at  the  discretion  of  Consfress, 
may  acquire  and  hold  real  property  in  any  State,  whenever 
such  property  is  needed  for  the  use  of  the  government  in 
the  execution  of  any  of  its  powers,  whether  for  arsenals, 
fortifications,  light-houses,  custom-houses,  court-houses, 
barracks  or  hospitals,  or  for  any  other  of  the  many  public 
purposes  for  which  such  property  is  used ;  and  Avhcu  the 
property  cannot  be  acquired  by  voluntary  arrangement  with 
the  owners,  it  may  be  taken  against  tlieir  will,  by  the  United 
States,  in  the  exercise  of  the  power  of  eminent  domain, 
upon  making  just  compensation,  with  or  without  a  concur- 
rent act  of  the  State  in  which  the  land  is  situated."  l 

§  22.  Liimitatious  of  exemption  of  U.  S.  lands,  etc. 

But  the  extent  of  the  exemption  of  lands  in  a  State  ac- 
quired by  the  United  States  may  be  limited  by  inserting 
terms  in  the  cession  by  the  former  which  the  latter  agrees 
to.  Thus  in  a  grant  by  Kansas  of  the  Fort  Leavenworth 
military  reservation  to  the  United  States,  the  State  re- 
served the  right  to  tax  the  railroads,  bridges  and  other 
corporations  within  the  territory  ceded,  and  it  was  held 
that  this  right  could  be  enforced  against  the  property  and 
franchises  of  a  railroad  company  within  the  reservation. ^ 

Where  land   was  acquired  by  the  United  States  for  the 


1  Chappell  V.  United  States,  IGO  U.  S.  510. 

2  Ft.  Leavenworth  Railroad  Co.  v.  Lowe,  114  U.  S.  525. 


26  UNITED    STATES    AGENCIES    AND    PROPERTY.  §    23 

erection  of  a  post  office  in  Kansas  City,  Missouri,  it  was 
held  that  the  moment  the  government  acquired  the  property, 
its  jurisdiction  over  it  became  absohite  and  exclusive,  and 
there  was  no  power  thereafter  to  enforce  the  lien  for  taxes 
which  theretofore  had  attached  under  the  State  laws.^  So 
the  exemption  of  land  from  taxation  continues  during  the 
interim  between  the  filing  of  an  original  land  warrant  and 
the  filing  of  a  substitute  warrant  issued  in  place  of  the 
original,  canceled  on  account  of  forgery  in  the  assignment. ^ 

§  23.  Lands  granted  to  railroads,  when  taxable. 

Where  a  railroad  land  grant  was  made  by  Congress,  JDro- 
viding  that  the  land  should  not  be  conveyed  to  the  com- 
pany until  the  United  States  treasury  was  paid  the  cost  of 
surveying,  selecting  and  conveying  the  same,  it  was  held  by 
the  Supreme  Court  that  this  exempted  the  lands  from  State 
or  territorial  taxation  until  the  required  payment  was  made. 
The  court  said  it  was  aware  that  the  company  miglit  take 
advantage  of  this  principle  and  neglect  to  pay  the  costs  in 
order  to  avoid  taxation,  but  that  the  remedy  was  with  Con- 
gress.^ Congress  thereupon  passed  the  Act  of  July  10, 
1886,  providing  that  surveyed  but  unpatented  lands  on 
which  the  costs  of  survey  had  not  been  paid,  included  in 
railroad  land  grants,  should  be  subject  to  State  taxation.* 

Where  public  lands  are  granted  to  a  State  by  Congress 
to  aid  in  the  construction  of  a  railway,  the  grantee  cannot 
tax  the  lands  while  it  holds  them  as  trustee  for  the  United 
States,  but  they  can  be  taxed  after  they  have  been  sold 
within  the  meaning  of  the  Act  of  Congress.^ 

1  Bannon  v.  Burns,  39  Fed.  Rep.  892;  Cir.  Ct.  W.  Dist.  of  Mo. 

2  Pitts  V.  Clay,  27  Fed.  Rep.  635;  U.  S.  Cir.  Ct.  Nor.  D.  Iowa. 

3  Nor.  Pac.  R.  R.  Co.  v.  Traill  County,  115  U.  S.  600;  Railway  Co.  v. 
McShane,  22  Wall.  444. 

4  Can.  Pac.  R.  R.  Co.  v.  Nevada,  162  U.  S.  512. 

^  Tucker  v.  Ferguson,  22  Wall.  627.  See  also  Hunnewell  v.  Cass  Co., 
22  Wall.  464. 


§   24  UNITED    STATES    AGENCIES    AND    PROPERTY.  27 

§  24.  The  title  essential  for  State  taxation. 

Lands  granted  to  railroads  by  the  United  States  become 
taxable  Avlien  the  equitable  title  of  the  company  is  per- 
fected by  its  compliance  with  the  requirements  of  the 
statute,  which  are  the  conditions  precedent  to  its  right  to  a 
patent,  whether  the  costs  of  survey  have  been  paid  or  not. ^ 
Thus,  it  was  decided  that  the  possessory  claim  of  the  Cen- 
tral Pacitic  Eailroad  to  its  land  grant  in  the  State  of 
Nevada  was  subject  to  taxation,  notwithstanding  the  fact 
that  the  lands  might  thereafter  be  determined  to  be  mineral 
lands,  and  so  excluded  from  the  operation  of  the  railroad 
grant.  As  long  as  the  company  asserted  a  possessor}^  claim 
to  the  lands,  a  corresponding  obligation  was  implied  to 
pay  the  taxes  upon  them.  The  court  further  decided  that, 
where  a  State  statute  defined  the  term  "  real  estate,"  as 
including  any  possessory  right  or  claim  in  the  land,  and 
accordingly  listed  such  right  or  claim  for  taxation,  this  in- 
volved no  Federal  question,  since  it  appeared  that  express 
authority  had  been  given  by  Congress  to  tax  the  lands. 

The  court  said  in  another  case  that  the  right  of  the  State 
to  tax  was  not  defeated  by  the  fact  that  there  was  a  con- 
troversy about  the  character  of  some  of  the  lands.  If 
there  is  an  uncertainty  it  must  be  resolved  by  the  railroad. ^ 
The  fact  that  the  mineral  lands  have  been  reserved  to  the 
United  States  docs  not  prevent  the  vesting  of  title  in  other 
lands,  and  the  latter  become  taxable  notwithstandinof  the 
reservation.  The  reports  of  the  United  States  surveyors 
that  lands  are  agricultural  and  not  mineral  is  sufficient,  as 
there  nmst  be  a  time  for  determining  once  for  all  what 
lands  are  mineral.     The  court  held  that  the  term  "  min- 


1  Central  Pac.  R.    R.    Co.   v.  Nevada,   162  U.   S.  612,  Justice  Field 
dissenting. 

2  Northern  Pac.  R.  Co.   v.  Myers,   172  U.   S.  689;  Justices  Brewer, 
White,  Shiras  and  Peckham  dissenting. 


2S  UNITED    STATES    AGENCIES    AND    PROPERTY.  ^  2Q 

eral  lands  ' '  in  such  a  reservation  meant  lands  known  to 
be  such  at  the  time  the  company  acquired  its  title. ^ 

§  25.  Ores  from  mineral  lands  taxable. 

Although  the  title  to  mineral  lands  may  remain  in  the 
United  States,  the  ores,  when  dug  or  extracted  under  a 
mining  claim,  are  free  from  any  claim  or  title  of  the  United 
States,  and  as  personal  property  they  are  subject  to  State 
taxation  in  hke  manner  as  other  personal  property.  This 
was  ruled  in  relation  to  the  mining  laws  of  Nevada  of  1871, 
taxing  mining  ores.^ 

§  26.   Indian  Reservations  not  taxable. 

In  the  case  of  the  Kansas  Indians,  the  court  held  that 
the  State  of  Kansas  had  no  right  to  tax  lands  held  in 
severalty  by  individual  Indians,  under  patents  issued  to 
them  by  virtue  of  treaties  made  with  their  tribes.^  The 
fact  that  the  primitive  habits  and  customs  of  the  tribe  had 
been  largely  broken  into  by  their  intercourse  with  the 
whites,  did  not  authorize  the  State  government  to  regard 
the  Indians  as  subject  to  its  laws.  Where  lands  are  exempt 
from  levy,  sale  and  forfeiture,  they  are  exempt  from  ordi- 
nary proceedings  for  the  collection  of  taxes.  The  Indian 
Reservations  reserved'to  the  Indians  in  their  tribal  relations 
by  the  United  States,  cannot  be  taxed  by  the  State.  Thus 
it  was  held  in  tlie  case  of  the  New  York  Indians,*  reversing 
the  New  York  Court  of  Appeals,  that  the  State  had  no 
power  to  tax  the  land  of  the  Indians,  their  ancient  and 
native  home,  the  enjoyment  of  which  had  been  secured  to 
them   by   treaty  with  the  Federal  government,    w^th  the 

1  Nor.  Pac.  R.  Co.  v.  Walker,  47  Fed.  Rep.  681;  Davis  d.  Weidbolt, 
139  U.  S.  507;  Northern  Pac.  R.  R.  v.  Wright,  i  C.  C.  A.  193. 

2  Forbes  v.  Gracey,  94  U.  S.  762. 

3  5  Wallace,  737. 
*  5  Wallace,  761. 


§   27  UXITED    STATES    AGENCIES    AND    rROPEETY.  29 

assurance  that  the  lands  should  remain  theirs  until  they 
chose  to  sell  them.  And  where  the  Indians,  under  an 
arrangement  approved  by  the  United  States,  agreed  to  sell 
their  lands  to  private  citizens  and  to  give  possession  after  a 
term  of  years,  the  taxation  of  the  laud  before  the  end  of 
that  term  was  premature.  A  sale  of  land  in  an  Indian 
Eeservation  for  State  taxes  is  void.^  But  the  exemption 
ceases  after  the  Indian  alienates  his  land  to  a  citizen.^ 

This  exemption  from  State  taxation  however  does  not  exist 
where  inconsistent  with  the  terms  of  a  treaty  of  the  United 
States  with  the  tribe.  This  was  held  in  the  case  of  a  half- 
blood  member  of  a  tribe  who  was  not  a  member  of  a  tribal 
organization  existing  in  the  State  as  a  distinct  political 
community,  and  who  had  received  patents  from  the  United 
States  for  lands  in  fee  simple.^ 

§  27.   Cattle,  etc.,  of  non-Indians  on  Indian  Reservation 
taxable. 

Cattle  owned  by  individuals  or  corporations,  and  pas- 
tured upon  an  Indian  reservation,  under  a  contract  with  the 
Indians,  sanctioned  by  the  United  States,  are  taxable  by 
the  State,  although  its  Constitution  contains  a  disclaimer 
of  all  right  of  any  kind  in  the  land  of  any  Indian  tribe 
until  the  Indian  right  is  extinguished.* 

The  same  principle  was  applied  by  the  Supreme  Court 
in  the  case  of  non-resident  owners  of  cattle  grazing  in  parts 
of  the  Osage  Indian  Reservation  in  Oklahoma,  which  were 
assessed  for  taxation  by  that  Territory.  It  was  claimed 
that  this  tax  was  invalid  on  the  ground  that  the  Indians 
were  directly  and  vitally  interested  in  the  property.     But 

1  Swope  V.  Purdy,  1  Dillon,  350. 

2  Peck  V.  Miami  County,  4  Dillon,  371. 

3  Pennock  v.  Commissioners,  103  U.  S.  44. 

^  Truscott  V.  Hurlbut  Land  &  Cattle  Co.,  19  C.  C.  A.  374,  Ninth 
Circuit. 


30  UNITED    STATES   AGENCIES   AND    PROPERTY.  §   28 

the  court  held  ^  that  this  was  too  remote  and  indirect  to 
be  deemed  a  tax  upon  the  lands  or  privileges  of  the  Indians, 
and  that  it  was  immaterial  that  the  cattle  were  not  in  any 
organized  county.  The  tax  was  levied  only  upon  the  per- 
sonal property, and  this  was  a  matter  of  detail  within  the 
legislative  discretion. 

Where  a  railroad,  chartered  under  the  laws  of  a  Territory, 
receives  a  grant  from  Congress  of  a  right  of  way  over  the 
Indian  Reservation  within  the  Territory,  that  part  of  it 
within  the  Reservation  is  subject  to  taxation  by  the  terri- 
torial government.^ 

The  fact  that  an  Indian  post  trader  is  licensed  by  the 
government  to  trade  with  the  Indians  does  not  exempt  his 
stock  in  trade  from  State  taxation,  such  trader  being  a 
mere  licensee,  and  not  an  agent  of  the  government.^ 

§  28.  State    taxation  of    railroads   incorporated  by  the 
United  States. 

The  Union  Pacific  Railroad  Company  was  organized 
under  Act  of  Congress,  and  there  was  no  provision  therein 
respecting  taxation  of  it  by  the  States  through  which  the 
road  should  run.  It  was  held  in  Thomson  v.  Pacific  Rail- 
road *that  the  principle  decided  in  McCuUoch  v.  Maryland, 
did  not  warrant  the  exemption  of  the  property  of  this  rail- 
road in  the  State  of  Kansas  from  State  taxation,  and  that 
there  was  a  clear  distinction  between  the  means  employed 
by  the  government  and  the  property  of  agents  employed 
by  the  government,  although  it  was  conceded  that  some  of 
the  reasoning  in  the  case  of  McCulloch  v.  Maryland 
seemed  to  favor  the  broader  doctrine.     In  this    case   the 


1  Thomas  v.  Gay,   169  U.  S.  264.     See  also  Wagoner  v.  Evans,  170 
U.  S.  588. 

2  Maricopa  &  Phoenix  R.  R.  Co.  v.  Arizona,  156  U.  S.  347. 

3  Cosier  ».  McMillan,  22  Mont.  484. 
*  9  Wallace,  579. 


§  28  UNITED    STATES    AGENCIES    AND    PROPERTY.  31 

railroad  company  was  originally  incorporated  by  the  legis- 
lature of  the  Territory  of  Kansas,  and  subsequently  by  the 
State  of  Kansas,  and  had  been  authorized  to  connect  with 
lines  constructed  by  the  company  incorporated  under  Act 
of  Congress.  Thus  the  corporation  in  this  case  was  a  State 
corporation  entitled  to  certain  benefits  and  subject  to  cer- 
tain duties  under  the  legislation  of  Congress.  The  court 
said  by  Chief  Justice  Chase,  1.  c,  page  590 :  — 

"We  do  not  think  ourselves  warranted,  therefore,  in 
extending  the  exemption  established  by  the  case  of  Mc- 
Culloch  V.  Maryland,  beyond  its  terms.  We  cannot  ap- 
ply it  to  the  case  of  a  corporation  deriving  its  existence 
from  State  law,  exercising  its  franchise  under  State  law, 
and  holding  its  property  within  State  jurisdiction  and  under 
State  protection." 

But  a  few  years  later  the  question  was  directly  presented 
as  to  the  taxability  under  State  law  of  the  property  of  the 
Union  Pacific  Railroad  Company  incorporated  under  Act 
of  Congress.  The  property  of  the  company  was  listed  for 
taxation  in  Lincoln  County,  Nebraska,  and  a  bill  was  filed 
to  enjoin  the  collection  of  the  tax.  It  was  strongly  urged 
that  the  Thomson  case  did  not  control,  because  that  com- 
pany was  incorporated  by  Kansas,  while  the  company  in 
this  case  was  incorporated  by  Act  of  Congress.  But  the 
court  held  ^  that  this  did  not  present  any  reason  for  the 
application  of  a  rule  different  from  that  which  was  appHed 
in  the  former  case,  saying,  at  p.  36 :  — 

"It  is,  therefore,  manifest  that  exemption  of  Federal 
agencies  from  State  taxation  is  dependent,  not  upon  the 
nature  of  the  agents,  or  upon  the  mode  of  their  constitu- 
tion, or  upon  the  fact  that  they  are  agents,  but  upon  the 
effect  of  the  tax;  that  is,  upon  the  question  whether  the 
tax  does  in  truth  deprive  them  of  power  to  serve  the  gov- 

1  Railroad  Co.  v.  Peniston,  18  Wallace,  5. 


32  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   29 

eminent  as  they  were  intended  to  serve  it,  or  does  hinder 
the  efficient  exercise  of  their  power.  A  tax  upon  their 
property  has  no  such  necessary  effect.  It  leav^es  them  free 
to  discharge  the  duties  they  have  undertaken  to  perform. 
A  tax  upon  their  operations  is  a  direct  obstruction  to  the 
exercise  of  Federal  powers." 

Justice  Swayne  concurred  on  the  ground  that  Congress 
had  not  given  the  exemption  claimed.^ 

In  a  later  case  the  same  principle  was  applied  to  the  tax- 
ability of  the  property  of  the  AVestern  Union  Telegraph 
Company,  a  State  corporation,  but  exercising  rights  con- 
ferred by  Congress. 2 

§  29.  Railroad  franchises  granted  by  United  States  not 
taxable. 

But  while  the  property  used  by  private  agencies  employed 
by  the  Federal  government  is  taxable  by  State  authorities 
unless  exempted  by  Act  of  Congress,  franchises  conferred 
by  Congress  are  not  taxable.  Thus  the  assessment  by  the 
State  of  California  upon  the  Pacific  railroads  incorporated 
by  Act  of  Congress  were  held  void,^  because  the  franchises 
granted  by  the  United  States  government  were  included  in 
the  valuation.  The  court  pointed  out  that  in  the  Thomson 
case  and  the  Peniston  case,  the  tax  was  upon  the  property 
of  the  company,  and  not  upon  the  franchises  or  operations, 

1  Three  Justices,  Bradley,  Field  and  Hunt,  dissented ;  Justice  Bradley 
saying  in  his  dissenting  opinion,  p.  50:  — 

"If  the  roadbed  may  be  taxed,  it  may  be  seized  and  sold  for  non- 
payment of  taxes  —  seized  and  sold  in  parts  and  parcels,  separated  by 
county  or  State  lines  —  and  thus  the  whole  purpose  of  Congress  in  cre- 
ating the  corporation  and  establishing  the  line  may  be  subverted  and 
destroyed. 

"  In  my  judgment,  the  tax  laid  in  this  case  was  an  unconstitutional 
interference  with  the  instrumentalities  created  by  the  national  govern- 
ment in  carrying  out  the  objects  and  powers  conferred  upon  it  by  the 
Constitution." 

2  Western  Union  Tel.  Co   v.  Massachusetts,  125  U.  S.  530, 

3  California  v.  Pacific  R   R.  C  >.,  127  U.  S.  3. 


§   30  LNITED    STATES    AGENCIES    AXD    PKOPEKTY.  33 

and  that  while  the  State  could  tax  the  "  outside,  visible  prop- 
erty of  the  company  "  situated  within  its  jurisdiction,  it  could 
not  tax  the  franchises  which  were  the  grant  of  the  United 
States.  Justice  Bradley  in  his  opinion  gives  the  following 
definition  of  a  franchise,  pp.  40-41 :  — 

§  30.  Definition  of  United  States   franchise. 

'*What  is  a  franchise?     Under  the  English  law  Black- 
stone  defines  it  as  "a  royal  privilege,   or  branch  of  the 
King's  prerogative,  subsisting  in  the  hands  of  a  subject." 
2  Bl.  Com.  37.     Generalized,  and  divested  of  the  special 
form  which  it  assumes  under  a  monarchical   government 
based  on  feudal  traditions,  a  franchise  is  a  right,  privilege 
or  power  of  public  concern,  which  ought  not  to  be  exercised 
by  private  individuals  at  their  mere  will  and  pleasure,  but 
should  be  reserved  for  public  control  and  administration, 
either  by  the  government  directly,   or  by  public  agents, 
acting  under  such  conditions  and  regulations  as  the  govern- 
ment may  impose  in  the  public  interest,  and  for  the  public 
security.     Such  rights  and  powers  must  exist  under  everv 
form  of  society.     They  are  always  educed  by  the  laws  and 
customs  of  the  community.     Under  our  system,  their  exist- 
ence and  disposal   are  under  the  control  of  the  legislative 
department  of  the  government,  and  they  cannot  be  assumed 
or  exercised  without  legislative  authority.     No  private  per- 
son can  establish  a  public  highway,  or  a  public  ferry,  or 
railroad,  or  charge  tolls  for  the  use  of  the  same,  without 
authority  from  the  legislature,  direct  or  derived.     These 
are    franchises.     No   private    person   can   take   another's 
propert}^,  even  for  a  public  use,  without  such  authority; 
which  is  the  same  as  to  say,  that  the  right  of  eminent 
domain  can  only  be  exercised   by  virtue   of    a    legislative 
grant.     This  is  a  franchise.     No  persons  can  make  them- 
selves   a   body    corporate   and    politic    without   legislative 

3 


34  UNITED    STATES   AGENCIES   AND   PROPERTY.  §   31 

authority.  Corporate  capacity  is  a  franchise.  The  list 
might  be  continued  indefinitely." 

It  was  said  further  that,  in  view  of  this  description  of 
the  nature  of  a  franchise,  it  followed  that  such  a  grant 
by  Congress  could  not  be  taxed  by  a  State  without  the 
consent  of  Congress,  and  that  the  taxation  of  a  corporate 
franchise  merely  as  such  was  the  exercise  of  an  authority 
somewhat  arbitrary  in  its  character,  as  it  had  no  limitation 
but  the  discretion  of  the  taxing  power.  "  The  valuation  of 
a  franchise  is  not  measured  like  that  of  property,  but  may 
be  ten  thousand  or  ten  hundred  thousand  dollars,  as  the 
legislature  may  choose,  or  without  any  valuation  of  the 
franchise  at  all  the  tax  may  be  arbitrarily  laid."  It  was 
therefore  held  that  the  levying  of  such  a  tax  by  the  State 
on  a  franchise  granted  by  Congress  was  not  only  deroga- 
tory to  the  dignity  but  subversive  of  the  power  of  the 
government  and  repugnant  to  its  paramount  authority. 

It  will  be  observed  that  this  definition  of  a  franchise  is 
made  to  show  that  from  its  nature  a  franchise  granted  by 
Congress  could  not,  without  its  consent,  be  taxed  by  a 
State,  while  the  definition  of  a  corporate  franchise  in  the 
Home  Insurance  Company  case,  supra,  §  18,  was  given  to 
show  that  it  was  a  property  right  granted  by  the  State,  and 
therefore  within  the  taxing  power  of  the  State. 

§  31.  Intangible   and  tangible  property   of  railroads  in- 
corporated by  U.   S.  taxable. 

But  it  is  only  the  franchises  granted  by  Congress  which 
are  not  taxable  by  State  authority.  The  intangible,  as 
well  as  the  tangible  'property,  of  the  company  is  subject  to 
State  taxation,  and  the  decision  of  the  Supreme  Court  of 
the  State  that  the  franchises  taxed  are  franchises  granted 
by  the  State  is  conclusive  upon  the  Federal  court. ^     The 

1  Central  Paciflc  R.  R.  Co.  u.  California,  162  U.  S.  91. 


§  31  UNITED    STATES    AGENCIES    AND    PROPERTY.  o5 

court  says  in  the  case  last  cited,  after  reviewing  the  de- 
cisions, at  page  125  :  — 

♦ '  It  may  be  regarded  as  firmly  settled  that  although  cor- 
porations may  be  agents  of  the  United  States,  their 
property  is  not  the  property  of  the  United  States,  but  the 
property  of  the  agents,  and  that  a  State  may  tax  the  prop- 
erty of  the  agents,  subject  to  the  limitations  pointed  out  in 
Railroad  Co.  v.  Peniston,  Van  Brocklin  v.  Tennessee,  117 
U.  S.  151,  177. 

"  Of  course,  if  Congress  should  think  it  necessary  for 
the  protection  of  the  United  States  to  declare  such  property 
exempted,  that  would  present  a  different  question.  Con- 
gress did  not  see  fit  to  do  so  here,  and  unless  we  are 
prepared  to  overrule  a  long  line  of  well-considered  decis- 
ions the  case  comes  within  the  rule  therein  laid  down. 
Although  in  Thomson's  case  it  was  tangible  property  that 
was  taxed,  that  can  make  no  difference  in  principle,  and 
the  reasoning  of  the  opinion  applies. 

"  Under  the  laws  of  California  plaintiff  in  error  ob- 
tained from  the  State  the  right  and  privilege  of  corporate 
capacity ;  to  construct,  maintain  and  operate ;  to  charge 
and  collect  fares  and  freights ;  to  exercise  the  power  of 
eminent  domain ;  to  acquire  and  maintain  right  of  way ;  to 
enter  upon  lands  or  waters  of  any  person  to  survey  route ; 
to  construct  road  across,  along  or  upon  any  stream,  water- 
course, roadstead,  bay,  navigable  stream,  street,  avenue, 
highway  or  across  any  railway,  canal,  ditch  or  flume;  to 
cross,  intersect,  join  or  unite  its  railroad  with  any  other 
railroad  at  any  point  on  its  route ;  to  acquire  right  of  way, 
roadbed  and  material  for  construction;  to  take  material 
from  the  lands  of  the  State,  etc.,  etc. 

"  It  is  not  to  be  denied  that  such  rights  and  privileges 
have  value  and  constitute  taxable  property." 


36  UNITED    STATES   AGENCIES   AND   PKOPERTT.  §  32 

§  32.  Letters  patent  and  copyrights. 

Letters  patent  ^  and  copyrights  ^  granted  by  the  United 
States  have  been  held  to  be  governed  by  the  same  princi- 
ple. Thus  a  State  cannot  require  a  license  for  the  use  of 
patent  rights  within  its  jurisdiction,  as  such  requirement  is 
a  violation  of  the  rights  of  the  patentee  under  the  Federal 
law.^  But  in  the  matter  of  patents  and  copyrights  a  dis- 
tinction, analoofous  to  that  made  in  the  case  of  railroad 
franchises  and  property,  is  taken  between  the  right  of  dis- 
covery and  the  right  of  property  in  the  fruit  of  the  dis- 
covery. Thus  in  the  language  of  the  Supreme  Court,*  the 
use  of  the  tangible  property  which  comes  into  existence  by 
the  application  of  the  discovery  protected  by  the  patent,  is 
not  beyond  the  control  of  State  legislation  simply  because 
the  patentee  obtains  a  monopoly  in  his  discovery.  And  in 
a  later  case  °  the  court  said,  1.  c,  page  347  :  — 

*' The  right  conferred  by  the  patent  laws  of  the  United 
States  does  not  take  the  tangible  property,  in  which  the 
invention  or  discovery  may  be  exhibited  or  carried  into 
effect,  from  the  operation  of  the  tax  and  license  laws  of 
the  State.  It  is  only  the  right  to  the  invention  or  discov- 
ery, the  incorporeal  right,  which  the  State  cannot  inter- 
fere with." 

This  distinction  was  applied  by  the  Supreme  Court  of 
Pennsylvania,^  to  the  case  of  a  lessee  of  the  American  Bell 
Telephone  Company,  who  was  held  to  be  taxable  by  the 
State  on  his  interest  in  the  telephone  instruments,  leased 


1  State  V.  Butler,  3  Lea  (Tena.)  222;  People  v.  Assessors,  156  N.  Y. 
417,  and  42  L.  R.  A.  290;  Commonwealth  v.  Electric  Co.,  151  Pa.  265. 

2  People  V.  Roberts,  159  N.  Y.  70,45  L.  R.  A.  126;  People  v.  Knight, 
73  N.  Y.  Supp.  745;  Peoples.  Harkness,  44  N.  Y.  Sup.  51. 

3  Commonwealth  v.  Petty,  9G  Ky.  452,  and  29  L.  R.  A.  786. 

4  Patterson  u.  Kentucky,  97  U.  S.  501. 
s  Webber  v.  Virginia,  103  U.  S.  344. 

6  Commonwealth  v.  Central  D.  &  P.  Co.,  145  Pa.  121. 


§   34  UNITED    STATES    AGENCIES    AND    PROPERTY.  37 

under  a  contract  granting  the  exclusive  use  for  a  term  of 
years.     The  court  said,  1.  c,  p.  130:  — 

"The  distinction  was  between  the  incorporeal  rights 
secured  by  letters  patent  and  the  tangible  commodity  or 
finished  product,  which  is  its  fruit.  This  finished  product 
or  fruit  is  merchandise,  whether  it  takes  the  form  of  a 
patent  reaper,  a  power  printing  press,  a  fountain  pen,  a 
pencil  sharpener,  or  an  instrument  called  a  telephone."  ^ 

§  33.  Corporate  capital  invested  in  patent  rights. 

Where  the  corporate  capital  is  invested  in  patent  rights, 
it  would  follow  from  the  rule  applied  in  the  case  of  gov- 
ernment securities  that  the  validity  of  the  tax  depends  upon 
whether  it  is  upon  corporate  property  or  the  stock  as  rep- 
resenting that  property,  and  that  if  it  is  upon  either,  the 
value  of  the  patent  rights  must  be  deducted,  as  in  the  case 
of  Federal  securities ;  but  otherwise  if  the  tax  is  upon  the 
corporate  franchise,  or  upon  the  shares  of  stock  to  the 
holders.  Thus  iu  a  Maryland  case,  it  was  held  that  as  the 
tax  was  levied  upon  the  owuers  of  the  corporate  shares,  it 
was  immaterial  what  the  assets  or  other  property  were, 
which  made  up  the  value  of  the  shares. ^ 

§  34.  State  tax  on  bequests  to  United  States, 

A  State  has  the  power  to  levy  an  inheritance  tax  upon  the 
right  of  inheritance,  which  is  in  effect  a  limitation  upon 
the  power  of  the  testator  to  bequeath  his  property  to 
whom  he  pleases.  The  tax  is  not  upon  the  property,  but 
upon  its  transmission  by  will  or  descent.  This  principle 
was  first  decided  in  an  interestino:  case  from  New  York, 
where  a  testator  devised  all  his  property  to  the  United 
States  government,  and  the  question  was  raised  whether 

1  See  also  Commonwealth  v.  Brush  Electric  Light  Co.,  145  Pa.  147, 

2  Crown  Cork  &  Seal  Co.  v.  Maryland,  87  Md.  687.  But  see  Common- 
wealth V.  Phila.  Co.,  157  Pa.  St.  627. 


38  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   35 

the  State  had  the  power  to  tax  bequests  made  to  the 
United  States.  The  court  held  that  it  had  such  power  and 
that  the  tax  must  be  paid  by  the  United  States  before  it 
could  receive  the  legacy.^  It  was  also  held  in  this  case 
that  the  Federal  government  was  not  organized  for  a  religi- 
ous, charitable  or  reformatory  purpose  within  the  meaning 
of  the  New  York  statute  exempting  such  corporations  from 
paying  the  tax,  and  that  the  exemption  was  not  intended 
to  apply  to  a  purely  political  or  government  corporation 
like  the  United  States. 

§  35.   United  States' securities  not  exempt  from  State  in- 
heritance tax. 

In  a  later  case  ^  the  court  held  that  a  legacy  of  United 
States  bonds  was  not  exempt  from  the  inheritance  tax  laws 
of  New  York,  although  it  appeared  on  the  face  of  the 
bonds  that  they  were  exempted  from  taxation  in  any  form 
by  State  authority.  It  was  urged  that  such  a  tax  impaired 
the  borrowing  power  of  the  government.  But  the  court 
held  that  this  was  too  remote  in  effect  to  make  the  statute 
invalid,  andthat  the  argument  would  apply  equally  to  State 
taxation  of  corporate  franchises,  measured  by  the  value  of 
the  corporation's  property  composed  in  whole  or  part  of 
United  States  bonds.  After  an  exhaustive  review  of  the 
decisions  as  to  the  nature  of  an  inheritance  tax,  the  court 
said,  1.  c.  page  134:  — 

"  "VYe  think  the  conclusion,  fairly  to  be  drawn  from  the 
State  and  Federal  cases,  is,  that  the  right  to  take  property 
bv  will  or  descent  is  derived  from  and  regulated  by  munici- 
pal law ;  that,  in  assessing  a  tax  upon  such  right  or  privi- 
lege, the  State  may  lawfully  measure  or  fix  the  amount  of 
the  tax  by  referring  to  the  value  of  the  property  passing ; 


1  United  States  v.  Perkins,  163  U.  S.  625. 

•  Plummer  v.  Coler,  178  U.  S.  115,  Justice  White  dissenting. 


§   36  UNITED    STATES    AGENCIES    AND    PROPERTY.  39 

and  that  the  incidental  fact  that  such  property  is  composed 
in  whole  or  in  part  of  Federal  securities  does  not  invalidate 
the  tax  or  the  law  under  which  it  is  imposed.' 

§  36.  Treaty-making  power  and  State  taxation. 

Treaties  made  under  the  authority  of  the  United  States, 
as  well  as  the  Constitution  and  laws  of  the  United  States, 
are  the  supreme  law  of  the  land,  Article  VI.,  Section  2. 
But,  it  would  seem,  a  treaty  made  by  the  United  States 
with  a  foreign  country  cannot,  any  more  than  a  statute, 
control  the  State  in  its  taxation  of  the  subjects  of  taxation 
within  its  jurisdiction,  and  that,  where  the  treaty  contem- 
plates action  by  a  State  upon  a  subject  within  its  jurisdic- 
tion, the  State  must  itself  accept  the  terms  of  the  treaty. 
This  was  illustrated  in  the  case  of  the  inheritance  tax  law  of 
Louisiana,  but  the  point  w^as  not  definitely  decided  by  the 
Supreme  Court.  The  laws  of  Louisiana  imposed  a  tax  of 
ten  per  cent  on  the  value  of  all  property  inherited  in  that 
State  by  any  person  not  domiciled  there  and  not  being  a 
citizen  of  any  State  or  Territory  of  the  United  States. 
The  treaty  with  France,  proclaimed  August  12,  1853,  pro- 
vided that  in  all  States  of  the  Union,  whose  laws  permitted, 
so  long  and  to  the  same  extent  as  said  laws  should  remain 
in  force,  Frenchmen  should  enjoy  the  right  of  possessing 
personal  and  real  property  in  the  same  manner  and  to  the 
same  extent  as  citizens  of  the  United  States,  and  that  in  no 
case  should  they  be  subjected  to  taxes  on  transfers,  inher- 
itances or  any  others,  different  from  those  paid  by  citizens 
of  the  United  States.  A  French*  subject  inheriting  a 
Louisiana  estate  from  his  sister  who  died  prior  to  the 
proclamation  of  the  treaty,  contested  the  payment  of  this 
tax.  The  Supreme  Court  in  affirming  the  judgment  of  the 
Supreme  Court  of  Louisiana,^  said,  through  Chief  Jusricc 

i  Prevost  V.  Grenaux,  19  How.  1.  The  courts  of  Louisiana  seem  to 
have  recognized  rights  of  aliens  under  treaty  stipulations  with  reference 
to  the  inheritance  tax,  see  Succession  of  Rixner,  48  L  Ann.  552,  32 
L.  R.  A.  177. 


40  UNITED    STATES   AGENCIES    AND   PROPEETY.  §  36 

Taney,  that  the  law  applied  to  cases  where  the  right  to  in- 
herit subsequently  accrued,  but  added  I.  c,  p.  7  :  — 

"  In  affirming  this  judgment,  it  is  proper  to  say  that  the 
obligation  of  the  treaty  and  its  operation  in  the  State,  after 
it  was  made,  depend  upon  the  laws  of  Louisiana.  The 
treaty  does  not  claim  for  the  United  States  the  right  of 
controlling  the  succession  of  real  or  personal  property  in  a 
State.  And  its  operation  is  expressly  limited  '  to  the  States 
of  the  Union  whose  laws  permit  it,  so  long  and  to  the  same 
extent  as  those  laws  shall  remain  in  force.'  And,  as  there 
is  no  act  of  the  legislature  of  Louisiana  repealing  this  law 
and  accepting  the  provisions  of  the  treaty,  so  as  to  secure 
to  her  citizens  similar  rights  in  France,  this  court  might 
feel  some  difficulty  in  saying  that  it  was  repealed  by  this 
treaty,  if  the  State  court  had  not  so  expounded  its  own 
law,  and  held  that  Louisiana  was  one  of  the  States  in  which 
the  proposed  arrangements  of  the  treaty  were  to  be  carried 
into  effect." 

As  to  the  treaty-making  power  with  reference  to  the 
taxing  power  of  Congress,  see  infra,  §  500. 

In  a  later  case,^  the  court  construed  the  treaty  with 
Wurteraburg  and  held  that  it  had  no  application  to  the 
property  of  a  naturalized  citizen  of  the  United  States  dying 
in  Louisiana.  It  said,  page  448:  "  It  has  been  suggested 
in  the  aroument  of  this  case,  that  the  o'overnment  of  the 
United  States  is  incompetent  to  regulate  testamentary  dis- 
positions or  laws  of  inheritance  of  foreigners,  in  reference 
to  property  within  the  States.  The  question  is  one  of  great 
magnitude,  but  it  is  oot  important  in  the  decision  of  this 
cause,  and  we  consequently  abstain  from  entering  upon  its 
Consideration." 

1  Frederickson  v.  Louisiana,  23  How.  445. 


§   37  UNITED    STATES    AGENCIES    AXD   PROPERTY  41 

§  37.  Tax  evasion  through  investments  in  U.  S.  securities. 

The  exemption  of  United  States  bonds  and  notes  from 
taxation  (now  repealed  as  to  notes)  afforded  opportunities 
for  tax  evasion,  which  however  found  no  favor  with  the 
courts.  Thus  where  a  citizen  of  Kansas  withdrew  liis  money 
from  bank  on  the  day  before  the  annual  date  for  listing 
for  taxation,  converted  this  money  into  United  States  notes 
and  deposited  them  as  a  special  deposit,  the  courts  affirmed 
a  judgment  of  the  Circuit  Court  of  Kansas  dismissmg  the 
bill  in  equity  to  restrain  the  collection  of  the  tax.  It  said 
that  a  court  of  equity  will  not  knowingly  use  its  extraor- 
dinary powers  to  i)roraote  any  such  scheme  as  this  plaintiff 
devised  to  escape  his  proportionate  share  of  the  burdens 
of  taxation,  and  that  his  remedy,  if  he  had  any,  was  in  a 
court  of  law. 

But  a  party  who  sued  at  law  to  recover  the  amount  of 
taxes  imposed  upon  him  under  somewhat  similar  circum- 
stances met  with  the  same  fate.^  In  his  case  the  court 
held  that  the  statute  of  Ohio  did  not  tax  the  citizens  for 
the  greenbacks  or  other  government  securities  which  they 
might  have  held  at  any  time  during  the  year,  but  taxed 
upon  the  money,  credits  or  other  capital  which  they  had 
or  used  according  to  the  monthly  average  of  the  preceding 
year,  and  that  this  was  not  in  conflict  with  the  laws  of  the 
United  States  exempting  United  States  notes,  the  court 
adding,  1.  c,  page  599:  — 

"  It  needs  no  other  evidence  that  the  rule  adopted  by  the 
State  of  Ohio  is  the  better  one  than  the  case  before  us,  by 
which  a  possessor  of  large  means,  subject  to  taxation  dur- 
ing every  day  in  the  3'ear  but  one,  may  escape  the  payment 
of  any  tax  upon  all  his  property, if  the  trick  resorted  to  in 
the  present  case  be  successful." 

1  Mitchell  V.  Board  of  Commissioners,  91  U.  S.  206. 

2  Shotwell  V.  Moore,  129  U.  S.  590. 


42  UNITED    STATES    AGENCIES    AND    PROPERTY.  §   38 

Justice  Bradley -however  dissented,  saying  that  he  did 
not  wish  to  aid  the  pkintiff,  but  it  was  a  question  of  law, 
and  the  hiw  of  Ohio  seemed  to  him  repugnant  to  the  Act 
of  Congress. 

§  38.  Payment  of  State  taxes  in  coin  sustained. 

Conoress  duriuor  the  Civil  War  authorized  the  issue  of 
the  so-called  " legal  tender"  treasury  notes,  and  made 
them  legal  tender  in  payment  of  all  debts,  pubhc  and  pri- 
vate, within  the  United  States,  except  duties  on  imports 
and  interest  on  bonds  and  notes  of  the  United  States.  The 
State  of  Oregon  required  the  payment  of  the  State  and 
school  taxes  in  gold  and  silver  coin.  The  Supreme  Court 
heldi  that  this  act  vi^s  vahd,  and  affirmed  the  judgment  of 
the  Supreme  Court  of  Oregon  for  the  payment  in  coin  of 
the  taxes  for  the  year  1863,  coin  being  then  at  a  premium, 
although  tender  of  payment  had  been  made  in  United 
States  notes,  which  were  then  depreciated.  It  said  that  the 
State  had  the  power  to  control  the  payment  of  its  own 
taxes,  and  that  there  was  nothing  in  the  Constitution  which 
contemplated  or  authorized  any  abridgment  of  this  power 
by  national  legislation.  The  Act  of  Congress  making  the 
United  States  notes  legal  tender  for  debts  had  no  reference 
to  taxes  imposed  by  State  authority. 

»  Lane  County  v.  Oregon,  7  Wall.  75. 


CHAPTER    II. 

CONTRACTS  OF  EXEMPTION  FROM  TAXATION. 

39.  Legislative  grants  held  to  be  contracts. 

40.  Grant  of  exemption  held  a  contract. 

41.  Contracts  of  exemption  not  implied. 

42.  The  validity  of  tax  exemption  contracts  established. 

43.  Application  to  consolidated  corporation. 

44.  Ohio  bank  tax  cases. 

45.  Missouri  exemptions  enforced  against  constitutional  repeal. 

46.  Opinion  in  Missouri  cases. 

47.  Dissent  in  Missouri  cases. 

48.  Northwestern  University  and  other  cases. 

49.  Banlj  notes  and  coupons  made  receivable  for  taxes. 
60.  Tennessee  constitutional  amendment  held  void. 

51.  Mississippi  notes  in  aid  of  Confederacy  held  void. 

52.  Chauge  in  remedy  not  impairment  of  contract. 

53.  The  Virginia  Coupon  Cases. 

64.  Virginia  Coupon  Cases  under  Act  of  1882. 

65.  The  Supreme  Court  on  the   Eleventh  Amendment  of  the  \S.    S. 

Constitution. 

66.  The  later  Virginia  Coupon  Cases. 

57.  The  Supreme  Court  on  Virginia  court  overruling  previous  opinion. 
68.  The  Supreme  Court  determines  for  itself  whether    State  legis- 
lation constitutes  a  contract. 

59.  Illustrations  of  the  independent  judgment  as  to  contract. 

60.  Contract  must  be  properly  brought  before  the  court. 

61.  When  State  court  not  followed. 

62.  When  concluded  by  decision  of  State  court. 

63.  When  and  to  what  extent  State  court  is  followed. 

64.  Limitation  of  independent  judgment. 

65.  Contract  only  impaired  by  a  law. 

66.  Impaired  by  municipal  ordinance  having  force  of  law. 

67.  What  constitutes  a  contract  of  exemption. 

68.  Railroad  franchise  is  property. 

69.  Conditional  exemptions. 

70.  Definition  of  corporate  dividend. 

71.  Tax  on  foreign  held  securities. 

72.  Taxation  by  State  or  municipality  of  its  own  securities. 

73.  Contract  right  to  tax  as  a  remedy. 

(43) 


44  IMPAIRMENT   OF   OBLIGATION   OF   CONTRACTS.        §  39 

§    74.  Remedy  may  be  changed,  if  substantial  right  not  impaired. 

75.  Contractual  and  governmental  legislation  distinguished. 

76.  Municipal  charter  powers  not  contractual. 

77.  Taxation  by  State  of  property  of  municipal  corporations. 

78.  State  control  of  proceeds  of  muncipal  taxation. 

79.  Retrospective  legislation  and  vested  rights. 

80.  Justice  Miller  on  legislative  contracts. 

81.  Tax  exemption  not  implied  from  license. 

82.  Bounties  and  privileges. 

83.  Consideration  for  exemption  essential. 
8t.  Judgment  for  torts  not  a  contract. 

85.  Tax  exemption  repealed  under  general  power  reserved  to  amend 

or  repeal. 

86.  Tax  exemption  strictly  construed. 

87.  "Immunity"  and  "privilege"  distinguished. 

88.  Lost  by  change  of  corporate  business. 

89.  Lost  by  repeal  before  incorporation  or  issue  of  stock. 
96.  Tax  exemption  is  a  personal  immunity, 

91.  Transferable  franchises  defined. 

92.  Effect  of  railroad  consolidation  on  tax  exemptions. 

93.  Corporate  exemption  limited  to  specific  form  of  taxation. 

94.  Property  of  corporations  and  shareholders  distinguished  in  con- 

tracts of  exemption. 

95.  Capital  stock  and  surplus  of  corporations. 

96.  Special  assessments. 

§  39.  Legislative  grants  held  to  be  contracts. 

The  Constitution  of  the  United  States  provides,  Ai'ticle  I., 
Sec.  10:  "  No  State  shall  pass  any  law  impairing  the  obli- 
gation of  contracts."  The  application  of  this  provision  to 
legislative  grants  of  exemption  from  taxation  is  firmly  es- 
tablished by  the  "decisions  of  the  Supreme  Court,  though 
from  the  beginning  there  has  been  a  series  of  dissents,  and 
the  doctrine  of  the  earlier  decisions  has  been  in  some  re- 
spects materially  modified  in  later  years. 

The  foundation  of  the  doctrine  was  laid  in  one  of  the  not- 
able opinions  of  Chief  Justice  Marshall,  Fletcher  v.  Peck, 
in  1810,^  wherein  it  was  held  that  this  provision  of  the  Con- 
stitution extends  to  contracts  to  which  the  State  is  a  party, 

1  6  Cranch,  87. 


§  40         IMPAIRMENT     OF    OBLIGATION    OF    CONTRACTS.  45 

that  is,  to  legislative  grants.  The  court  said  that  while  one 
legislature  is  competent  to  repeal  any  act  of  general  legis- 
lation which  a  former  legislature  was  competent  to  pass, 
yet  if  an  act  is  done  under  a  law,  a  succeeding  legislature 
cannot  undo  it.  "  It  will  be  strange  if  a  contract  to  con- 
vey was  secured  by  the  Constitution,  while  an  absolute 
convey ance  remained  unprotected." 

§  40.   Grant  of  exemption  held  a  contract. 

Soon  after,  the  same  principle  was  applied  by  the  court  ^ 
to  the  act  of  the  legi.'^lature  of  New  Jersey  enacted  in  1758, 
providing  that  lands  purchased  from  the  Delaware  Indians, 
and  set  apart  for  their  use,  in  consideration  of  a  release  by 
them  of  other  lands,  should  not  thereafter  be  subject  to 
any  taxation,  any  law  or  usage  or  custom  to  the  contrary 
notwithstanding,  and  further  restraining  the  Indians  from 
making  any  lease  or  sale.  Subsequently,  the  legislature, 
having,  at  thepetition  of  the  Indians,  authorized  a  sale  by 
an  act  making  no  reference  to  the  exemption  from  taxation, 
the  land  in  1803  was  sold.  After  the  sale  the  legislature, 
in  1804,  passed  an  act  repealing  the  exemption  from  taxa- 
tion. It  was  held  by  the  court  in  an  opinion  by  Chief 
Justice  Marshall,  reversing  the  New  Jersey  court,  that  this 
was  a  valid  contract  protected  by  the  Constitution,  and 
that  the  privilege,  though  for  the  benefit  of  the  Indians, 
was  annexed  by  the  terms  of  the  act  to  the  land  and  not  to 
the  persons. 2 

'  New  Jersey  v.  Wilson,  7  Cranch,  164. 

2  Certain  of  the  lands  held  exempt  in  this  case  had  been  leased  out 
under  an  act  of  1796,  which  was  not  brought  to  the  attention  of  the 
court  in  the  Wilson  case,  and  subsequently  for  about  sixty  yi:ars  taxes 
were  regularly  asf-essed  upon  these  lands  and  paid.  It  was  held  by  the 
Supreme  Court  in  Given  v.  Wright,  117  U.  S.  648,  that  this  probably 
would  not  have  affected  that  decision,  which  had,  at  all  events,  been 
referred  to  and  relied  on  in  so  many  cases  from  the  date  of  its  rendition 
that  it  would  cause  a  shock  to  our  jurisprudence  to  disturb  it,  and  added 


46  IMPAIRMENT   OF    OBLIGATION    OF   CONTRACTS.        §  41 

§  41.  Contracts  of  exemption  not  implied. 

After  the  decision  in  the  Dartmouth  College  case,  that 
the  clause  of  the  Constitution  under  consideration  applied 
to  corporate  charters,  the  claim  was  made  that  an  act  of  the 
Ehode  Island  legislature  imposing  a  tax  on  every  bank  in 
the  State  except  the  Bank  of  the  United  States,  on  the  cap- 
ital stock  actually  paid  in,  impaired  the  obligation  of  the 
contract  created  by  the  charter  granted  by  Ehode  Island 
to  Providence  Bank.  The  court  held,  in  an  opinion  by 
Chief  Justice  Marshall,  that  as  the  charter  contained  no  stip- 
ulation promising  exemption  from  taxation,  the  State  had 
made  no  express  contract,  and  hence  no  contractual  obliga- 
tion had  been  Impaired. 

It  was  argued  that  the  power  to  tax  involved  the  power 
to  destroy  all  the  profits  of  the  franchise,  and  therefore 
was  inconsistent  with  the  grant.  But  the  court  replied 
that  the  relinquishment  of  the  power  of  taxation  was  never 
to  be  presumed,  and  that  the  argument  logically  pursued 
would  apply  with  equal  force  to  every  incoiporated  com- 
pany and  even  to  the  taxation  of  land.  The  principle 
applied  in  McCulloch  v.  Maryland  and  Osborn  v.  Bank  of 
the  United  States  had  no  application.  The  exemption 
there  was  founded  expressly  on  the  supremacy  of  the  laws 
of  Congress,  and  the  necessary  consequence  of  that  su- 
premacy was  to  exempt  its  instruiuent  employed  in  the 
execution  of  its  powers  from  the  operation  of  any  inter-. 
fering  power  whatever.     The  vital  power  of  taxation  may 

at  p.  655:  "  If  the  question  were  a  new  one  we  might  regard  the  reason- 
ing of  the  New  Jersey  judges  as  entitled  to  a  great  deal  of  weight, 
especially  since  the  emphatic  declarations  made  by  this  court  in  Provi- 
dence Bank  v.  Billings,  4  Peters,  514,  and  other  cases,  as  to  the 
necessity  of  having  the  clearest  legislative  expression  in  order  to  impair 
the  taxing  power  of  the  State."  But  apart  from  that,  the  court  held 
that  long  acquiescence  under  the  imposition  of  the  taxes  raised  the 
presumption  that  the  exemption  which  had  once  existed  had  been 
surrendered. 


§  42    IMPAIRMENT  OF  OBLIGATIOM  OF  CONTRACTS.     47 

be  abused,  but  the  Constitution  of  the  United  States  was 
not  intended  to  furnish  the  correction  of  every  abuse  of 
power  which  may  be  committed  by  the  State  governments. 
«« The  interest,  wisdom  and  justice  of  the  representative 
body  and  its  relations  wnth  its  constituents  furnish  the  only 
security  where  there  is  no  express  contract  against  unjust 
and  excessive  taxation  as  well  as  against  unwise  legislation 
generally."  ^ 

§  42.  The  validity  of  tax  exemption  contracts  established. 

In  1845,  in  the  case  of  Gordon  v.  Appeals  Tax  Court,^ 
Ihe  principle  that  contracts  to  which  the  State  is  a  party, 
are  protected  by  the  Federal  Constitution  from  impairment 
of  their  obligation,  was  enforced  for  the  first  time  by  the 
Supreme  Court  in  case  of  exemption  from  taxation  in  a 
coiporate  charter.  An  act  of  Maryland  continuing  a 
bank  charter,  upon  condition  that  the  corporation  should 
pay  certain  sums  for  public  purposes,  and  declaring  that 
upon  its  accepting  and  complying  with  the  provisions  of  the 
act,  the  faith  of  the  State  was  pledged  not  to  impose  any 
further  tax  or  burden  upon  the  corporation  during  the  con- 

1  Providence  Bank  v.  Billings,  4  Pet.  514.  Justice  McLean,  in  delivering 
the  opinion  of  the  court  in  Piqua  Branch  Bank  v.  Knoop,  16  Howard,  387, 
says :  "  In  the  argument  the  case  of  Providence  Bank  v.  Billings,  4  Peters, 
561  (decided  in  1830) ,  was  referred  to.  This  reference  impresses  me  with 
the  shortness  and  uncertainty  of  human  life.  Of  all  the  judges  on  this 
bench  when  that  decision  was  given  I  am  the  only  survivor.  From  several 
circumstances  the  principles  of  that  case  were  strongly  impressed  upon  my 
memory,  and  I  was  surprised  when  it  was  cited  in  support  of  the  doctrines 
maintained  in  the  case  before  us.  The  principle  held  in  that  case  was,  that 
where  there  was  no  exemption  from  taxation  in  the  charter,  the  bank 
might  be  taxed.  This  was  the  unanimous  opinion  of  the  judges,  but  no 
one  of  them  doubted  that  the  legislature  had  the  power,  in  the  charter 
or  otherwise,  from  motives  of  public  policy,  to  exempt  the  bank  from 
taxation,  or  by  compact  to  impose  a  specific  tax  upon  it."  See  also 
Memphis  Gas  Co.  v.  Shelby  Co.,  100  U.  S.  398,  holding  that  exemption 
from  license  taxation  could  not  be  inferred. 

2  3  Howard,  133. 


48  IJIPAIKIVIENT    OF    OBLIGATION    OF    CONTRACTS.         §   44 

tinuance  of  the  charter,  was  held  to  exempt,  not  only  the 
franchise,  but  the  stockholders  from  a  tax  levied  upon  them 
as  individuals.  It  has  been  held  in  Liter  cases  that  this 
decision  tui'ned  upon  the  construction  of  the  act  of  Marj^- 
land  above  mentioned,  exempting  the  bank  from  taxation 
on  account  of  a  large  bonus  to  the  State,  and  that  the  stock- 
holders upon  a  true  construction  of  the  act  were  within  the 
terms  of  the  exemption.^ 

§  43.  Application  to  consolidated  corporation. 

Later  decisions  of  the  court  applied  the  principle  to  the 
case  of  a  consolidated  corporation  made  up  of  constituent 
roads,  one  of  which  had  a  chartered  exemption  from  taxa- 
tion. It  was  held  ^  that  the  exemption  must  be  strictly  con- 
stimed,  that  the  taxing  power  is  never  presumed  to  have  been 
relinquished  unless  the  intention  to  relinquish  is  declared  in 
clear  and  unambiguous  terms,  and  that  such  of  the  property 
of  the  consolidated  company  as  was  subject  to  taxation  be- 
fore, continued  to  ])e  so  subject,  notwithstanding  the  claim  to 
exemption  of  part  of  it,  which  could  onl}'  apply  to  that  part. 

§  44.  Oliio  bank  tax  cases. 

In  a  series  of  decisions  the  court  enforced  the  limitation, 
contained  in  its  charter,  upon  the  liability  to  taxation  of  the 
State  Bank  of  Ohio.^  The  charter  provision  was  held  in 
these  cases  to  be  in  lieu  of  all  taxes  to  which  the  company 
or  stockholders  would  be  otherwise  subject.     In  Jefferson 

i  This  case  has  been  criticised  and  distinguished  on  the  proposition 
that  exemption  may  be  implied  from  the  payment  of  a  consideration  for 
the  franchise.  See  New  Orleans  &c.  Co.  v.  New  Orleans,  143  U.  S.  192 
and  195;  also  upon  the  extension  of  an  exemption  of  corporate  property 
and  franchises  to  corporate  stockholders,  see  Shelby  County  v.  Union 
Bank,  161  U.  S.  149  and  157;  see  also  dissenting  opinion  of  Justice 
Catron  in  Piqua  Branch  v.  Knoop,  16  Howard,  401. 

'■^  Philadelphia  &  Wilmin;j;ton  R.  Co.  v.  Maryland,  10  Howard,  376. 

3  Piqua  Branch  v.  Knoop,  16  Howard,  368,  three  judges,  Catron,  Dan- 
iel and  Campbell  dissenting;  Ohio  Life  Ins.  &  Trust  Co.  ».  Debolt,  16 
How.  416;  Dodge  v.  Woolsey,  18  How.  331. 


§  45         IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  49 

Branch  Bank  v.  Skelly,^  decided  in  1861,  the  court  reaffirmed 
this  ruling,  refusing  to  conform  to  the  decision  of  the  Su- 
preme Court  of  Ohio,  which,  it  seems,  had  changed  its  ruling 
upon  the  subject.  But  it  said  that  its  "  appellate  power 
would  be  of  no  use  to  a  litigant  if  the  court  could  not  de- 
cide independently  of  all  adjudication  of  the  Supreme  Court 
of  the  State,  whether  or  not  the  phraseology  of  the  instru- 
ment in  controversy  was  expressive  of  a  contract  and  within 
the  protection  of  the  Constitution  of  the  United  States, 
and  its  obligation  should  be  enforced,  notwithstanding  a 
contrary  conclusion  of  the  Supreme  Court  of  the  State." 
And  the  court  added  :  — 

' '  We  are  aware  that  the  very  stringent  rule  of  construc- 
tion of  this  court  in  respect  to  taxation  by  a  State  has  not 
been  satisfactory  to  all  persons.  But  it  has  been  adhered 
to  by  this  court  in  every  attempt  hitherto  made  to  relax  it; 
and  we  presume  it  will  be,  until  the  historical  recollec- 
tions, which  induced  the  f  ramers  of  the  Constitution  of  the 
United  States  to  inhibit  the  States  from  passing  any  law 
impairing  the  obligation  of  contracts,  have  been  forgotten. 
This  court's  view  of  that  clause  of  the  Constitution,  in  its 
application  to  the  States,  is  now,  and  ever  has  been,  that 
the  State  legislatures,  unless  prohibited  in  terms  by  State 
constitutions,  may  contract  by  legislation  to  release  the  ex- 
ercise of  taxing  a  particular  thing,  corporation,  or  person, 
as  that  may  appear  in  its  act,  and  that  the  contrary  has  not 
been  open  to  inquiry  or  argument  in  the  Supreme  Court  of 
the  United  States." 

§  45.  Missouri  exemptions  enforced  against  constitutional 
repeal.    • 

The  general  subject  of  the  inviolability  of  charter  exemp- 
tions, particularly  with  reference  to  charitable  and  educa- 
tional corporations,  is   very  thoroughly   discussed   in  the 

1  1  Black,  436. 


50  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §   45 

Home  of  the  Friendless  ^  and  the  Washington  University  ^ 
cases  from  Missouri,  decided  in  1869.  Both  of  these  cor- 
porations had  been  chartered  by  the  State  of  Missouri,  and 
their  charters  exempted  their  property  from  taxation.  At 
that  time  there  was  no  constitutional  prohibition  of  such  ex- 
emptions. Subsequentl}'-,  however,  the  constitution  of  1865 
prohibited  all  exemptions  from  taxation.  The  Supreme 
Court  of  Missouri^  held  that  the  property  was  taxable,  and 
said  in  the  University  case :  — 

"  AVhen  the  charter  of  the  university  was  granted,  the 
legislature  might  have  considered  it  reasonable  to  foster 
and  encourage  it  in  its  infancy  and  confer  upon  it  privi- 
leores  and  immunities  while  struo^o-lino;  into  existence.  But 
no  provision  is  made  in  express  terms,  or  by  reasonable  in- 
tendment, that  those  immunities  should  be  perpetual  and 
have  the  effect  of  withdrawing  millions  of  subsequently 
acquired  property  from  taxation.  In  1853  taxes  were  light 
and  the  State  debt  was  small,  and  exemptions  could  be  made 
without  great  detriment.  After  that  period  the  State  em- 
barked into  a  false  and  ruinous  system  of  loaning  its  credit  to 
corporations,  by  which  it  incuiTed  an  immense  debt ;  then 
followed  the  Civil  War, which  increased  its  already  burden- 
some obligations,  and  taxation  became  exceedingly  onerous. 

"  In  this  condition  of  things  it  was  deemed  the  part  of 
wisdom  to  make  all  property  within  the  jurisdiction  of  the 
State,  receiving  the  benefit  of  her  laws  and  protection,  con- 
tribute its  proper  proportion  and  share  the  common  burdens. 
This  was  entirely  a  matter  resting  in  the  sound  discretion 
of  the  legislative  branch  of  the  government,  and  we  have 
been  unable  to  find  any  objection  to  their  exercise  of  the 
power." 

1  8  Wallace,  430. 

2  8  Wallace,  439.  See  remarks  of  court  as  to  this  case  in  Grand 
Lodge  V.  New  Orleans,  166  U.  S.  143. 

3  Washington  University  v.  Rowse,  42  Mo.  308,  i.  c.  p.  326. 


§   46         IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  51 

§  46.  Opinion  in  3Iissouri  cases. 

Both  cases  were  reversed  by  the  Supreme  Court  (Chief 
Justice  Chase  and  Justices  Miller  and  Field  dissenting). 
The  court  said,  in  Home  of  the  Friendless  v.  Rowse,  I.e. 
page  438 :  — 

' '  The  validity  of  this  contract  is  questioned  at  the  bar 
on  the  ground  that  the  legislature  had  no  authority  to 
grant  away  the  power  of  taxation.  The  answer  to  this 
position  is,  that  the  question  is  no  longer  open  for  argu- 
ment here,  for  it  is  settled  by  the  repeated  adjudications 
of  this  court,  that  a  State  ntay  by  contract  based  on  a  con- 
sideration exempt  the  property  of  an  individual  or  corpo- 
ration from  taxation,  either  for  a  specified  period  or 
permanently.  And  it  is  equally  well  settled  that  the  ex- 
emption is  presumed  to  be  on  sufficient  consideration  and 
binds  the  State  if  the  charter  containing  it  is   accepted." 

It  was  said  further,  that  it  was  unnecessary  that  there 
should  have  been  a  consideration  named  in  the  act ;  it  was 
sufficient  if  the  legislature  deemed  the  objects  of  the 
grant  to    be  beneficial  to  the  community. 

To  the  argument  made  in  the  University  case,  that  the 
exemption  involved  a  dangerous  power  Avhieh  might  be 
abused  by  the  university,  the  court  replied,  1.  c.  page 
440 :  — 

"  It  is  urged  that  the  corporation,  as  there  is  no  limit  to 
its  right  of  acquisition,  may  acquire  property  be3'ond  its 
legitimate  wants,  and  in  this  way  abuse  the  favor  of  the 
legislature,  and  in  the  end  become  dangerous,  on  account 
of  its  wealth  and  influence.  It  would  seem  that  this  ajipre- 
hension  was  more  imaginary  than  real,  for  the  sccurit}' 
against  this  course  of  action  is  to  lie  found  in  the  nature 
of  the  object  for  which  the  corporation  was  created.  It 
was  created  specially  to  promote  the  endowment  of  u 
seminary  of  learning,  and  it  is  not  to  be  presumed  that  it 
will  ever  act  in  such  a  manner  as  to  jeopardize  its  corporate 


52  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.        §   47 

rights ;  nor  can  there  be  any  well-grounded  fear  that  it  will 
absorb,  in  its  efforts  to  establish  a  literary  institution  of 
high  order  of  merit,  in  the  city  of  St.  Louis,  any  more 
property  than  is  necessary  to  accomplish  that  object. 
Should  a  state  of  case  in  the  future  arise  showing  that  the 
corporation  has  pursued  a  different  line  of  conduct,  it  will 
be  time  enough  then  to  determine  the  rights  of  the  parties 
to  this  contract,  under  this  altered  condition  of  things. 
The  present  record  presents  no  such  question,  and  we  have 
no  right  to  anticipate  that  it  will  ever  occur.  It  is  enough 
for  the  purpose  of  this  suit  to  say,  that  so  long  as  the  cor- 
poration uses  its  property  to  support  the  educational  estab- 
lishments for  which  it  was  organized,  it  does  not  forfeit 
its  right  not  to  be  taxed  under  the  contract,-  which  the 
State  made  with  it." 

§  47.  Dissent  in  3Iissouri  cases. 

Justice  Miller  in  a  strong  dissenting  opinion,  in  which 
Chief  Justice  Chase  and  Justice  Field  concurred,  said,  1.  c. 
page  443 :  — 

*'  "We  do  not  believe  that  any  legislative  bod}',  sitting 
under  a  State  constitution  of  the  usual  character  has  the 
right  to  sell,  to  give  or  to  bargain  away  forever  the  taxing 
power  of  the  State.  This  is  a  power  which,  in  modern 
political  societies,  is  absolutely  necessary  to  the  continued 
existence  of  every  such  society.  T^Tiile  under  such  forms 
of  government  the  ancient  chiefs  or  heads  of  the  govern- 
ment might  carry  it  on  by  revenues  owned  by  them  person- 
all}',  and  by  the  exaction  of  personal  service  from  their 
subjects,  no  civilized  government  has  ever  existed  that  did 
not  depend  upon  taxation  in  some  form  for  the  continuance 
of  that  existence.  To  hold,  then,  that  any  one  of  the 
annual  legislatures  can,  by  contract,  deprive  the  State  for- 
ever of  the  power  of  taxation,  is  to  hold  that  they  can 


§  48         IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  53 

destroy  the  government  which  they  are  appointed  to  serve, 
and  that  their  action  in  that  regard  is  strictly  lawful." 

*  *  *  "  With  as  full  resi^ect  for  the  authority  of 
former  decisions,  as  belongs,  from  teaching  and  habit,  to 
judges  trained  in  the  common-law  system  of  jurisprudence, 
we  think  that  there  may  be  questions  touching  the  powers  of 
legislative  bodies,  which  can  never  be  finally  closed  by  the 
decisions  of  a  court,  and  that  the  one  we  have  here  consid- 
ered is  of  this  character.  We  are  strengthened,  in  this 
view  of  the  subject,  by  the  fact  that  a  scries  of  dissents, 
from  this  doctrine,  by  some  of  our  predecessors,  shows 
that  it  has  never  received  the  full  assent  of  this  court ;  and 
referring  to  those  dissents  for  more  elaborate  defense  of 
our  views,  we  content  ourselves  with  thus  renewing  the 
protest  against  a  doctrine  which  we  think  must  finally  be 
abandoned." 

§  48.  Northwestern  University  v.  People  and  other  cases. 

In  University  v.  People  of  Illinois,^  the  court,  in  an 
opinion  by  Justice  Miller,  held  that  the  statute  of  Illinois, 
as  construed  by  the  Supreme  Court  of  the  State,  limiting 
the  chartered  exemptions  of  the  Northwestern  University 
to  the  lands  and  other  property  in  the  immediate  use  of 
the  institution,  was  erroneous  and  that  the  exemption  ex- 
tended to  the  propert}'^,  the  annual  profits  whereof  were 
devoted  to  the  purposes  of  the  institution. 

In  the  case  of  St.  Ann's  Asylum  in  New  Orleans,  which 
was  exempted  from  taxation  as  to  all  of  its  property,  real 
and  personal,  it  was  held  that  the  exemption  extended  to 
the  devise  of  certain  property,  ^.  e.,  a  cotton  press,  the 
revenues  whereof  were  applied'to  as^'lum  purposes.^  But 
in  the  case  of  Christ  Church  Hospital  of  Philadelphia,^  it 

1  99  u.  S.  309. 

2  Asylum  v.  New  Orleans,  105  U.  S.  362. 

2  Rector  &c.  v.  County  of  Philadelphia,  24  Howard,  300. 


54  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.        §    50 

was  held  that  there  was  no  contract  for  perpetual  exemp- 
tion, but  only  a  gratuitous  concession  on  account  of  tem- 
porary conditions. 

§  49.  Bank  notes  and  coupons  made  receivable  for  taxes. 

The  charters  of  banks  of  some  of  the  Southern  States 
provided  that  their  bills  and  notes  should  be  receivable  in 
pajanents  of  all  taxes  and  other  moneys  due  the  States. 
It  was  held  that  such  charters  were  contracts  on  the  part 
of  the  States  with  all  subsequent  holders  of  the  notes,  as  if 
attached  to  the  notes  when  issued,  and  that  the  contract 
right  to  tender  the  notes  in  payment  of  taxes  continued 
after  the  repeal  of  that  section  of  the  charter. ^  The  court 
said:  "The  guaranty  is  in  no  sense  a  personal  one.  It 
attaches  to  the  note,  — is  a  part  of  it  as  much  so  as  if  writ- 
ten on  the  back  of  it,  and  goes  with  the  note  everywhere 
and  invites  every  one  who  has  taxes  to  pay  to  take  it." 

§  50.  Tennessee  constitutional  amendment  held  void. 

In  Tennessee,  a  constitutional  amendment  adopted  in  1865 
declared  the  issues  of  the  Bank  of  Tennessee  during  the  Civil 
War  to  be  void,  and  forbade  their  receipt  for  taxes.  But  it 
was  held^  that  this  amendment  was  void,  for  there  was 
only  one  State  of  Tennessee  and  its  attempted  secession 
was  ineffective.  The  political  body  continued  as  a  State  in 
the  Union  and  never  escaped  the  obligations  of  the  Consti- 
tution. The  court  in  its  opinion  cites  the  periods  of  the 
Commonwealth  in  England  and  of  the  Eevolution  in  France 
as  showing  that  the  acts  of  the  government  were  upheld. 
It    could   not  presume  that  the  notes  were  issued  to  sup- 

1  Woodruff  u.  Trapnall  (Arkansas),  10  How.  190;  Furmaa  v.  Nichol, 
8  Wallace,  44;  State  v.  Stoll  (S.  C.  ),  17  Wallace,  425. 

2  Keith  V.  Clark,  97  U.  S.  454. 


§   53  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  55 

port  the  rebellion  because  issued  contemporaneously  with 
it,  and  the  tender  of  notes  in  payment  of  taxes  was  held 
good.^ 

§51.  Mississippi  notes  in  aid  of  Confederacy  held  void. 

-  But  where  notes  were  issued  by  the  legislature  of  Missis- 
sippi in  aid  of  the  Confederacy,  in  1861,  and  made  receiv- 
able inpayment  of  taxes,  they  were  void  and  not  receivable 
in  payment  of  taxes,  which  the  reorganized  State  govern- 
ment directed  should  be  paid  in  the  currency  of  the  United 
States. 2 

§  52.  Change  in  remedy  not  impairment  of  contract. 

A  State  having  contracted  for  the  receipt  of  its  bank 
notes  in  payment  of  taxes  does  not  impair  the  obligation 
of  a  contract  by  enlarging,  limiting  or  altering  the  modes 
of  procedure  for  enforcing  it,  provided  the  remedy  be  not 
vrithheld  or  embarrassed  with  restrictions  which  seriously 
impair  the  value  of  the  right.  Thus  a  taxpayer  in  Tennes- 
see, who  was  limited  to  an  action  at  law  against  the  tax  col- 
lector to  recover  the  amount  of  taxes  paid  in  money  under 
protest,  was  held  to  have  an  ample  remedy.^ 

§  53.  The  Virginia  Coupon  Cases. 

The  question  of  the  enforcement  of  a  State  contract  and 
the  receipt  of  State  obligations  in  payment  of  taxes,  par- 
ticularly w4th  reference  to  the  ade(|uate  remedies  provided 
for  the  enforcement  of  such  contract,  was  thoroughly  con- 
sidered in  every  possible  phase  by  the  Supreme  Court  in  a 
series  of  cases  known  as  the  Virginia  Coupon  Cases,  involv- 

1  Chief  Justice  Waite  and  Justices  Bradley  and  Harlan  dissenting. 
-  Taylor  v.  Thomas,  22  Wallace,  479. 

3  Tennessee  v.  Sneed,  96  U.  S.  69,  see  infra,  change  in  remedy;  South 
Carolina  w.  Gailard,  101  U.  S.  433. 


56  IMPAIBJNIEXT   OF   OBLIGATION   OF   CONTRACTS.  §  54 

ing  litigation,  which,  in  different  forms,  was  before  the 
court  during  a  period  of  twenty  years. 

The  State  of  Virginia  in  1871,  in  adjusting  its  debt  with 
its  creditors  on  account  of  the  separation  of  "West  Virginia 
during  the  Civil  War,  provided  for  funding  two-thirds  of 
its  outstanding  debt  and  accrued  interest  in  bonds  and  cou- 
pons, the  remaining  one-third  to  be  represented  by  certifi- 
cates with  a  view  to  settlement  with  West  Virginia.  To 
facilitate  the  acceptance  of  this  adjustment,  it  was  provided 
that  the  coupons  should  be  receivable  at  and  after  maturity 
for  all  taxes,  debts,  dues  and  demands  due  the  State,  and 
that  this  should  be  expressed  on  their  face.  The  validit}' 
of  this  contract  was  at  first  sustained  by  the  Court  of 
Appeals  of  Virginia,  which  held  invalid  an  act  repealing 
the  provision  for  the  receipt  of  coupons  for  taxes.  There- 
after however  an  act  was  passed  providing  that  from  the 
coupons  when  received  for  taxes  there  should  be  deducted 
a  State  tax  equal  to  fifty  cents  on  the  one  hundred  dollars 
of  the  market  value  of  the  bonds,  this  act  applying  in  terms 
to  aU  bonds  of  the  State,  whether  held  by  her  own  citizens 
or  by  non-residents  and  citizens  of  other  States  and  coun- 
tries. The  court  held  ^  that  the  receivability  of  the  coupons 
for  taxes  was  clearly  a  contract  obligation  inuring  to  the 
benefit  of  aU  the  holders  of  the  bonds  and  coupons ;  that 
the  coupons  were  distinct  and  independent  contracts,  and 
that  the  taxing  act  could  not  be  applied  to  coupons  sepa- 
rated from  the  bonds  and  held  by  different  owners  without 
impairing  the  contract  with  the  bondholder  and  the  bearers 
of  the  coupons,  as  contained  in  the  funding  act. 

§  54.  Virginia  Coupon  Cases  under  Act  of  1882. 

In  1882,  the  State  enacted  a  law  providing  that  when  a 
mandamus  was  sued  out  against  the  collector  of  taxes  to 

1  Hartman  v.  Greenhow,  102  U.  S.  672. 


§  55        IMPAIRMENT   OF   OBLIGATIOX   OF   CONTRACTS.  57 

compel  the  receipt  of  coupons  in  payment,  the  taxpayer 
should  be  required  to  pay  the  taxes  in  money  and  file  his 
coupons  for  the  trial  of  the  issue  as  to  their  genuineness. 
If  the  issue  was  found  in  their  favor,  the  money  paid  was 
to  be  refunded  out  of  the  State  treasury  in  preference  to  all 
other  claims.  The  court,  reaffirming  its  opinion  as  to  the 
contract  right  to  pay  taxes  in  coupons,  held  that  the  rem- 
edy provided  by  this  act  was  adequate  and  efficacious,  and 
substantially  equivalent  to  that  which  existed  at  the  date 
when  the  coupons  were  issued.^  It  said,  however,  that  the 
question  whether  the  tax  collector  was  not  bound  in  law  to 
receive  the  coupons  when  tendered,  and  whether,  if  he  re- 
fused them  and  proceeded  with  the  collection  of  the  tax,  he 
could  not  be  made  personally  responsible  in  damages  was 
not  before  them. 


§  55.  The  Supreme  Court  on  the  Eleventh  Amendment 
of  the  U.  S.  Constitution. 

This  question  did  come  later  before  the  court  in  a  series 
of  cases,  reported  as  the  Virginia  Coupon  Cases. ^  The 
court  reaffirmed  its  previous  opinion,  and  held  that  the  tax- 
payer was  not  compelled  to  seek  the  remedy  provided  by 
the  act  of  1882.  He  could  tender  his  coui)ons,  and  such 
tender  would  be  equivalent  to  payment  so  far  as  concerned 
the  legality  of  all  subsequent  steps  by  the  collector  to 
enforce  payment  by  distraint  of  his  property.  The  cou- 
pons, made  receivable  for  taxes,  were  not  bills  of  credit 
within  the  prohibition  of  the  Constitution,  nor  was  the 
right  of  the  taxpayer  to  sue  the  collecting  officer  for  the 
recovery  of  property  seized  for  taxes  after  he  had  made  a 
lawful  tender  a  suit  against  the  State  within  the  mean- 
ing of    the  Eleventh    Amendment  of  the  Constitution  of 


1  Antoni  v.  Greenhow,  107  U.  S.  769. 

2  114  U.  S.  269. 


58  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    56 

the  United  States.  On  this  point  (four  judges  dissent- 
ing) the  court  said  that  there  was  a  distinction  between 
the  government  of  a  State  and  the  State  itself ;  that,  in 
contemplation  of  law,  the  State  had  not  passed  the  acts 
violative  of  the  Constitution  of  the  United  States,  as 
they  were  void,  and  therefore  the  officer  had  no  official 
sanction  for  his  conduct  and  was  guilty  of  a  personal 
violation  of  the  plaintiff's  rights.  It  also  sustained  the 
remedy  by  injunction  against  the  collection  of  the  tax,  in 
cases  where  there  was  no  adequate  remedy  at  law,  but 
held  that  a  coupon  holder,  who  had  not  alleged  that  he  was 
a  taxpayer,  was  not  entitled  to  any  relief.  No  direct  action 
moreover  for  the  denial  of  rights  secured  by  the  contract 
would  lie  on  the  16th  clause  of  section  629  of  the  Revised 
Statutes  of  the  United  States,  but  the  remedy  must  be  a 
judicial  determination  between  individuals  as  to  the  validity 
of  the  law,  under  cover  of  which  the  attempt  to  collect  the 
tax  had  been  made,  and  the  consequent  wrongful  disturb- 
ance of  property  rights  occasioned. 

One  having  tendered  coupons  in  payment  of  a  license 
required  for  the  practice  of  a  profession  could  go  on  prac- 
ticing his  profession,  and  any  law  of  the  State  subjecting 
him  to  criminal  proceedings  therefor  was  invalid.  He  was 
not  obliged  to  sue  out  a  mandamus  to  compel  the  accept- 
ance of  the  coupons.^ 

§  56.  The  later  Virginia  Coupon  Cases. 

Another  series  of  coupon  cases  came  up  for  decision  in 
1889,2  g^(j  ii^Q  court  held  void  sundry  acts  of  the  Virginia 
legislature  opposing  impediments  and  obstructions  to  the 
use  of  the  coupons,  on  the  ground  that  these  materially  im- 

1  Royall  V.  Virginia,  116  U.  S.  572,  and  Sands  v.  Edmunds,  116  U.  S. 
585.     See  also  Willis  v.  Miller,  29  Fed.  Rep.  238. 

2  135  U.  S.  662. 


§   56  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  59 

paired  the  obligation  of  the  contract.  Thus  the  provision 
which  imposed  upon  the  taxpayer  the  duty  of  i)resenting 
the  bond,  from  which  the  coupons  were  cut,  at  the  time  of 
tendering  them  in  payment,  was  an  unreasona])lc  condition. 
Another  provision  also  was  held  invalid  which  prohibited 
expert  testimony  to  establish  the  genuineness  of  the  coupons. 
A  special  license  fee  of  one  thousand  dollars  required  for 
the  right  to  offer  tax  receivable  coupons  was  adjudged  a 
material  interference  with  their  negotiability.  The  court 
conceded  that,  the  rules  affecting  the  remedy  were  subject 
at  all  times  to  moditication  and  control  by  the  legislature, 
even  as  to  existing  causes  of  action,  but  declared  that  no 
legislature  had  the  power  to  establish  rules  which,  under 
the  pretense  of  regulating  evidence,  went  so  far,  as  to 
altogether  preclude  the  party  "  from  exhibiting  his  rights." 
It  was  held  also  that  the  coupons  were  lawfully  tendered  in 
payment  of  costs  of  suits,  as  well  as  in  payment  of  taxes, 
and  that  the  time-limit  of  one  year  for  tendering  coupons 
was,  under  the  circumstances,  unreasonable. 

On  the  other  hand,  the  requirement  that  the  taxes  for 
licenses  to  sell  liquors  and  school  taxes  should  be  paid  in 
lawful  money,  and  not  in  coupons,  did  not  impair  the  obli- 
gation of  the  contract.  As  to  the  liquor  license  this  de- 
cision was  put  on  the  ground  that  there  was  involved  the 
principle  of  regulation  as  well  as  taxation ;  and  the  act  of 
1871,  as  applied  to  the  fund  for  maintjiining  schools,  was 
contrary  to  the  Virginia  constitution  of  1869. 

The  court  remarks,  concluding  the  opinions  in  this  series 
of  cases,  at  page  721 :  "  It  is  certainlj^  to  be  wished  that 
some  arrangement  may  be  adopted  Avhich  will  be  sntisfactoiy 
to  all  parties  concerned  and  relieve  the  courts  as  well  as  the 
Commonwealth  of  Virginia,  ^vhose  name  and  history  recall 
so  many  interestmg  associations,  from  all  further  exhibi- 
tions of  a  controversy  that  has  become  a  vexation  and  a 
regret." 


60      IMPAIRMENT  OF  OBLIGATION  OF  CONTRACTS.    §  57 

§  57,  Tlie  Supreme  Court  on  Virginia   court  overruling 
previous  opinion. 

But  this  wish  was  not  gratified,  and  the  next  step  was  a 
decision  by  the  Court  of  Appeals  of  Virginia  reversing  its 
previous  opinions,  and  dismissing  the  petition  of  the  phiin- 
tiff,  who  tendered  coupons  in  payment  of  his  taxes,  on  the 
ground  that  the  coupon  provision  of  the  act  of  1871  was 
void.^ 

This  case  was  brought  by  wi'it  of  error  to  the  Supreme 
Court,  where  the  judgment  was  reversed, ^  the  court  saying, 
in  its  opinion  by  Justice  Brewer,  1.  c.  page  106  :  — 

"  Perhaps  no  litigation  has  been  more  severely  contested 
or  has  presented  more  intricate  and  troublesome  questions 
than  that  which  has  arisen  under  the  coupon  legislation  of 
Virginia." 

The  previous  decision  was  reaffirmed.  Under  the  circum- 
stances, said  the  court,  it  seemed  to  them  that  it  would  be 
a  clear  evasion  of  the  duty  cast  upon  them  by  the  Consti- 
tution of  the  United  States  to  treat  all  this  litigation  and 
these  prior  decisions  as  mere  nullity  and  consider  the  ques- 
tion as  a  matter  de  novo.  It  seemed  that  the  act  of  1882 
for  testing  the  genuineness  of  the  coupons  which  had  been 
adjudged  an  adequate  and  efficacious  remedy  in  Antoni  v. 
Greenhow  had  been  repealed  and  it  had  not  been  determined 
by  the  Court  of  Appeals  of  Virginia  whether  the  remedy 
of  mandamus  to  enforce  the  receipt  of  coupons  for  taxes 
existed.  The  court  said  that  if  it  should  be  finally 
held  by  that  court  that  the  remedy  of  mandamus  did 
not  exist,  then  it  would  be  a  question  for  further 
consideration  whether  the  act  repealing  the  act  of  1882 
could  be  sustained. 


1  McCullough  V.  Virginia,  90  Va.  597. 

2  McCullough  V.  Virginia,  172  U.  S.  102. 


§  58        IMPAIRMENT   OF   OBLIGATION   OF   CONTRACTS.  61 

§  58.  The  Supreme  Court  determines  for  itself  whether 
State  legislation  constitutes  a  contract. 

It  has  been  the  uniform  ruling  of  the  Supreme  Court 
that  it  determines  for  itself  whether  the  State  lesfislation 
in  question  constitutes  a  contract,  and  it  is  not  bound  by 
the  decision  of  the  State  court  holding  that  a  particular 
charter  or  charter  provision  does  not  constitute  a  con- 
tract. This  is  an  exception  to  the  general  rule  that  the 
Federal  courts  accept  the  construction  placed  by  the 
courts  of  a  State  upon  its  statutes  and  constitution. 
Thus  the  court  said,  in  McGahey  v.  Virginia,*  1.  c.  page 
667 :  — 

"  In  ordinary  cases  the  decision  of  the  highest  court  of  a 
State  with  regard  to  the  validity  of  one  of  its  statutes 
would  be  binding  upon  this  court;  but  where  the  question 
raised  is  whether  a  contract  has  or  has  not  been  made,  the 
obligation  of  which  is  alleged  to  have  been  impaired  by 
legislative  action,  it  is  the  prerogative  of  this  court,  under 
the  Constitution  of  the  United  States  and  the  acts  of  Con- 
gress relating  to  writs  of  error  to  the  judgments  of  State 
courts,  to  inquire,  and  judge  for  itself  with  regard  to  the 
making  of  such  contract,  whatever  may  be  the  views  or 
decisions  of  the  State  courts  in  relation  thereto." 

Thus  if  a  statute  of  a  State  creates  a  contract  and  it  is 
alleged  that  a  subsequent  statute  impairs  the  obligation  of 
that  contract,  and  the  highest  court  in  the  State  construes 
the  first  statute  in  such  a  manner  that  the  second  statute 
does  not  impiiir  it,  a  judgment  of  the  State  court  sus- 
taining the  validity  of  the  second  statute  on  account 
of  its  construction  of  the  first  statute  will  be  subject  to 
review  on  writ  of  error  in  the  United  States  Supreme 
Court.2 


1  133  U.  S.  662. 

2  Bridge  Proprietors  v.  Hoboken  Co.,  1  Wallace,  116. 


62  IMPAIRMENT   OF   OBLIGATION   OF   CONTRACTS.         §   60 

§  59.  Illustrations    of  the   independent  judgment   as  to 
contract. 

In  the  case  of  Mobile  &  Ohio  EailroadCo.  v.  Tennessee, ^ 
the  State  Supreme  Court  held  that  the  charter  exemption 
from  taxation  relied  on  as  a  contract  was  in  violation  of  the 
State  constitution.  Eeversing  this  decision,  the  court  held, 
p.  492:  "The  question  of  the  existence  or  non-existence 
of  a  contract  in  cases  like  the  present  is  one  which  this 
court  will  determine  for  itself,  the  established  rule  being 
that  where  the  judgment  of  the  highest  court  of  a  State, 
by  its  terms  or  necessary  operation,  gives  effect  to  some 
provisions  of  the  State  law  which  is  claimed  by  the  unsuc- 
cessful party  to  impair  the  contract  set  out  and  relied  on, 
this  court  has  jurisdiction  to  determine  the  question  whether 
such  a  contract  exists  as  claimed,  and  whether  the  State 
law  complained  of  impairs  its  obligation." 

The  constitution  of  Missouri  of  1865  provided  for  a  tax 
of  ten  per  cent  upon  the  gross  earnings  of  certain  railroad 
corporations.  As  to  one  company  it  was  held  that  this  tax 
was  an  impairment  of  the  obligation  of  a  contract,^  but  in 
the  case  of  another  company  the  tax  was  sustained  because 
the  court  found  that  the  contract  of  exemption  had  expired 
by  its  own  limitation.^ 

§  60.  Contract    must  be  properly  brought    before   the 
court. 

The  Supreme  Court  will,  however,  decide  this  question 
of  the  existence  and  impairment  of  a  contract,  only  when 
the  judgment  of  the  State  court  is  brought  before  it  for 
review.  If  the  decision  of  the  State  Supreme  Court  is  in 
favor  of  the  right  or  immunity  claimed  under  the  United 

1  153  U.  S.  486. 

2  Pacific  Railroad  Co.  v.  Maguire,  20  Wallace,  36. 

3  North  Missouri  R.  R.  Co.  v.  Maguire,  20  Wallace,  46. 


§    61  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  03 

States  Constitution,  it  is  final.  The  same  question  how- 
ever may  be  brought  before  the  Supreme  Court  from  one 
of  the  United  States  Circuit  Courts  in  the  exercise  of  its 
appellate  jurisdiction.  In  such  case  the  court  exercises  its 
independent  judgment,  and  may  determine  that  there 
was  no  contract  of  exemption  from  taxation,  notwith- 
standing a  prior  judgment  of  the  State  court  to 
the  contrary.  Thus  in  a  case  from  Tennessee  on 
appeal  from  the  United  States  Circuit  Court, ^  the  prior 
judgment  of  the  State  Supreme  Court,  sustaining  the 
claim  of  exemption  was  urged,  but  the  court  said,  1.  c. 
page  151 :  — 

♦'  In  such  a  case  as  this  where  we  are  to  construe  the 
meaning  of  the  clause  of  the  statute  as  to  what  contract  is 
contained  therein,  and  whether  the  State  has  passed  any 
law  impairing  its  obligation,  we  are  not  bound  by  the  pre- 
vious decisions  of  the  State  courts,  except  when  they  have 
been  so  long  and  so  firmly  esta])lished  as  to  constitute  a 
rule  of  property  (which  is  not  the  case  here),  and  we 
decide  for  ourselves  independently  of  the  decisions  of  the 
State  courts,  whether  there  is  a  contract  and  whether 
its  obligations  are  impaired." 

§  61.  When  State  court  not  followed. 

In  a  recent  Kentucky  case  however  the  State  court 
overruled  its  decision  that  the  act  constituted  a  contract  in 
the  case  of  another  party,  so  that  the  question  came 
before  the  Supreme  Court.  ^  It  was  urged  upon  that 
tribunal   that  it    should  follow  the  first   decision  of    the 


1  Shelby  County  v.  Union  &c.  Bank,  IGl  U.  S.  149.  See  also  Bank 
of  Conamerce  v.  Tennessee,  161  U.  S.  134,  144;  also  L.  &  N.  R.  R.  Co.  v. 
Palmes,  109  U.  S.  245. 

2  Citizens'  Savings  Bank  v.  Owensboro,  173  U.  S.  636.  See  also  Stone 
Wo  Bank  of  Commerce,  174  U.  S.  412. 


64  IMPAIRMENT   OF   OBLIGATION   OF    CONTRACTS.        §   61 

Stiite  court    construing   the    State    statute,  but    it   said, 
pp.  647-8 :  — 

"  Undoubtedly  in  the  Bank  Tax  cases,  97  Kentucky, 
597,  the  Court  of  Appeals  of  Kentucky  decided  that  the 
Hewitt  law  created  an  irrevocable  contract,  and  that  the 
general  assembly  of  that  State  could  not  repeal,  alter  or 
amend  it  without  impairing  the  obligation  of  the  contract, 
despite  the  existence  of  the  act  of  1856,  and  despite  the 
circumstances  that  that  act  was  in  express  terms  incorpo- 
rated in  and  made  part  of  the  Hew^itt  law.  But  the  rea- 
soning by  which  the  court  reached  this  conclusion  is 
directly  in  conflict  with  the  settled  line  of  decisions  of 
this  court  just  referred  to,  and  the  case  has  been  specifi- 
cally overruled  by  the  opinion  announced  by  the  Kentucky 
Court  of  Appeals  in  the  case  now  under  review.  It  is  not 
and  cannot  be  asserted  that  the  Bank  Tax  cases  w^ere  de- 
cided before  the  contract  evidenced  by  the  Hewitt  law  was 
accepted,  hence  it  cannot  be  urged  that  such  decision 
entered  into  the  consideration  of  the  parties  in  forming  the 
contract.  It  is  not  pretended  that  the  bank,  whose  rights 
are  here  contested,  w^as  either  a  party  or  privy  to  the  Bank 
Tax  cases.  And  even  if  such  were  the  case,  we  must  not 
be  understood  as  intimating  that  the  construction  of  the 
Hewitt  Act,  which  w^as  announced  in  the  Bank  Tax  cases, 
would  be  binding  in  controversies  as  to  other  taxes  between 
those  who  were  parties  or  jDrivies  to  those  cases.  On  this 
subject  we  expressly  abstain  from  now  intimating  an  opinion. 
In  determining  whether,  in  any  given  case,  a  contract 
exists,  protected  from  impairment  by  the  Constitution  of 
the  United  States,  this  court  forms  an  independent  judg- 
ment. As  we  conclude  that  the  decision  in  the  Bank  Tax 
cases  above  cited,  upon  the  question  of  contract,  w^as  not 
only  in  conflict  W'ith  the  settled  adjudications  of  this  court, 
but  also  inconsistent  with  sound  principle,  we  will  not  adopt 
its  conclusions." 


§   62  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  65 

As  the  court  decides  for  itself  whether  a  legislative  act 
or  charter  constitutes  a  contract  and  will  not  be  concluded 
by  the  decision  of  the  State  court,  a  fortiori  it  will  not 
follow  the  State  court  when  the  latter  reverses  its  previous 
judgment  that  the  act  constituted  a  contract.^ 

§  62.  When  concluded  by  decision  of  State  court. 

The  Supreme  Court,  however,  adopts  the  ruling  of  the 
State  court  on  points  relating  to  the  construction  of  the 
State  constitution  and  statutes,  other  than  as  to  the  exist- 
ence of  a  contract  and  the  impairment  of  its  obligation. 
Thus  on  the  question  whether  a  company  was  doing  busi- 
ness in  the  State  within  the  meaning  of  its  statute,  the 
court  is  concluded  by  the  judgment  of  the  State  court. 
Thus  in  Erie  Eailroad  Co.  v.  Pennsylvania,'  it  is  said:  — 

"  The  Supreme  Court  of  that  State  has  held  that  this 
*  company  was  doing  business  in  the  State  in  the  sense  of 
that  act.'  This  construction  of  a  State  statute  by  the 
Supreme  Court  of  the  State,  involving  no  question  under 
the  laws  or  Constitution  of  the  United  States,  is  conclusive 
upon  us.  We  accept  the  construction  of  State  statutes  by 
the  State  courts,  although  we  may  doubt  the  correctness  of 
such  construction.  We  accept  and  adopt  it,  although  we 
may  have  already  accepted  and  adopted  a  different  con- 
struction of  a  similar  statute  of  another  State,  in  deference 
to  the  Supreme  Court  of  that  State." 

Thus  on  the  question  whether  the  act  done  by  or  under 
the  authority  of  the  State  impairs  the  obligation  of  a  con- 
tract, the  effect  of  the  act  must  be  determined  in  the  light 
of  the  construction  given  by  the  State  court.  If  that  act 
as  construed  and  enforced  in  the  State  court  impairs  con- 
tract rights,  then  the  Federal    court  has   jurisdiction,  to 

1  Jefferson  Branch  Bank  v.  Skelly,  supra. 

2  21  Wallace,  492,  497. 

5 


66  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS..       §    64 

determine,  not  the  correctness  of  the  construction,  but 
whether  the  effect  of  the  act  as  construed  is  to  impair  the 
contract  right. 

§  63.  When  and  to  what  extent  State  court  is  followed. 

In  a  Lite  case  ^  the  court  said  that  although  it  is  its  duty 
to  exercise  an  independent  judgment  as  to  the  nature  and 
extent  of  a  contract  when  its  jurisdiction  is  invoked  because 
of  the  asserted  impairment  of  contract  rights  from  the 
effect  given  to  subsequent  legislation,  nevertheless,  when  the 
contract  alleged  to  have  been  impaired  arises  from  a  State 
statute,  the  Federal  court,  for  the  sake  of  harmony  and  to 
avoid  confusion,  will  lean  towards  an  agreement  with  the 
State  court,  if  the  question  seems  balanced  with  doubt. 
The  constitutional  question  was  held  to  be  sufficiently  raised 
by  a  public  board,  which  the  State  court  had  held  to  have 
enough  fiduciary  capacity  for  that  purpose,  since  this 
power  of  the  State  board  was  a  matter  of  local  law,  on 
which  the  decision  of  the  State  court  would  be  accepted. 

§  64.  Limitation  of  independent  judgment. 

The  "independent  judgment"  of  the  Supreme  Court 
was  materially  limited  under  the  decision  in  a  recent  case.^ 
The  charter  of  a  Mississippi  railroad  granted  in  1882  con- 
tained an  exemption  from  taxation  for  twenty  years.  The 
State  constitution  then  in  force  had  been  construed  by  the 
State  Supreme  Court  as  authorizing  exemptions  from  taxa- 
tion, but  also  making  them  repealahle.  It  was  held  that 
this  ruling  of  the  Mississippi  court  that  the  constitution 
only  authorized  repealable  exemptions  involved  a  local  and 
not  a  Federal  question,  and  the  Supreme  Court  therefore 
could  not  review  the  action  of  the  State  court  in  holding 

1  Board  of  Liquidation  v.  Louisiana,  179  U.  S.  622. 

2  Gulf  &Sliip  Island  K.  R.  Co.  v.  Hewes,  183  U.  S.  66. 


§   6Q  IMPAIRMENT    OF    OBLIGATIOX    OF    CONTRACTS.  6< 

the  exemption  to  have  been  repealed  b}^  a  subsequent  stat- 
ute; and,  further,  that  this  ruling  applied  both  to  privi- 
lege taxes  and  property  taxes,  since  both  were  reuealable 
exemptions. 

§  65.  Contract  only  impaired  by  law. 

Limits  are  also  set  to  the  independent  judgment  of  the 
Supreme  Court  in  deciding  a  case  of  alleged  impairment  of 
contract,  by  the  jurisdiction  of  the  State  court  to  determine 
the  construction  of  the  subsequent  act  by  which  the  con- 
tract is  claimed  to  have  been  impaired.  A  contract  can 
only  be  impaired  under  this  provision  of  the  Constitution  by 
a  law;  that  is,  a  law  subsequently  enacted.  In  the  lan- 
guage of  the  Supreme  Court :  — 

"  The  State  court  may  erroneously  determine  questions 
arising  under  a  contract  which  constitutes  the  basis  of  the 
suit  before  it ;  it  may  hold  a  contract  void  which  in  our 
opinion  is  valid ;  it  may  adjudge  a  contract  to  be  valid  which 
in  our  opinion  is  void;  or  its  interpretation  of  the  con- 
tract may,  in  our  opinion,  be  radically  wrong ;  but  in  neither 
of  these  cases  would  the  judgment  be  reviewable  by  this 
court  under  the  clause  of  the  Constitution  protecting  the 
obligation  of  contracts  against  impairment  by  State  legis- 
lation, and  under  the  existing  statutes  defining  and  regulat- 
ing its  jurisdiction,  unless  that  judgment  in  terms  or  by  its 
necessary  operation  gives  effect  to  some  provision  of  the 
State  constitution,  or  some  legislative  enactment  of  the 
State,  which  is  claimed  by  the  unsuccessful  party  to  impair 
the  obligation  of  the  particular  contract  in  question."  ^ 

§  66.  Impaired  by  municipal  ordinance  having  force    of 
law. 

But  the  term  "  law  "  includes  not  only  a  provision  of  the 
State  constitution  or  State  statute,  but  also  a  municipal  ordi- 

1  Lehigh  Water  Co.  v.  Easton,  121  U.  S.  388,  392. 


68  IMPAIRMENT    OF    OBLIGATION    OF    CONTEACTS.         §    68 

nance  having  the  force  of  hiw.  Thus  a  tax  levied  by  a 
municipahty  under  its  chartered  power,  is  a  law  in  this  sense. ^ 
But  whether  the  ordinance  of  a  municipality  has  the  force 
of  law  so  as  to  constitute  an  impairment  of  the  contract,  is 
a  question  involving  the  construction  of  local  law,  whereon 
the  Supreme  Court  will  follow  the  ruling  of  the  State  court. ^ 

§  67.  What  constitutes  a  contract  of  exemption. 

A  legislative  grant  may  constitute  a  contract,  if  the  con- 
tract is  clearly  expressed  in  it,  and  the  right  of  contract  may 
be  based,  not  only  upon  what  is  actually  contained  in  the 
act  itself,  but  also  upon  what  by  reference  is  made  part  of 
it.^  The  exemption,  however,  must  be  clearly  stated,  and 
cannot  be  established  by  implication.* 

The  grant  of  all  the  powers,  rights  and  privileges  granted 
by  the  charter  of  another  corporation  carries  with  it  an  ex- 
emption from  taxation  included  in  such  charter.  The  court 
said,  1.  c.  page  247:  "A  more  important  or  more  com- 
prehensive privilege  than  a  perpetual  immunity  from  taxa- 
tion can  scarcely  be  imagined.  It  contains  the  essential 
idea  of  a  peculiar  benefit  or  advantage,  of  a  special  exemp- 
tion from  a  burden  falling  upon  others."  ^ 

§  68.  Railroad  franchise  is  property. 

The  exemption  of  the  property  of  a  railroad  company 
and  the  shares  thereof  ' '  from  any  public  charge  or  tax 
whatsoever,"  has  been  held  to  include  the  exemption  of  the 

1  Murray  v.  Charleston,  S6  U.  S.  432,  440. 

2  New  Orleans  Water  Works  Co.  v.  Louisiana  Sugar  Refining  Co., 
125  U.  S.  18. 

3  Humphrey  v.  Pegues,  16  Wallace,  244. 

4  Memphis  Gas  Co.  v.  Shelby  Co.,  109  U.  S.  398,  and  cases  cited. 

s  But  see  later  case  of  Phoenix  Ins.  Co.  v.  Tennessee,  161  U.  S.  174, 
to  effect  that  there  must  be  other  language  than  the  word  "privilege," 
or  other  provisions  in  the  statute  removing  all  doubt  as  to  the  intention 
of  the  legislature  before  the  exemption  will  be  admitted.    Infra,  p.  87. 


§   69  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  69 

franchise    from    taxation,    the    court  saying,    1.   c.  page 
267:1  — 

' '  Property  is  a  word  of  large  import,  and  in  its  applica- 
tion to  this  company  included  all  the  real  and  personal 
estate  required  by  it  for  the  successful  prosecution  of  its 
business.  *  *  *  Nothing  is  better  settled  than  that  the 
franchise  of  a  private  corporation  —  wliich  in  its  applica- 
tion to  a  railroad  is  the  privilege  of  running  it  and  taking 
fare  and  freight- — is  property,  and  of  the  most  valuable 
kind,  as  it  cannot  be  taken  for  public  use  even  without  com- 
pensation. It  is  true  it  is  not  the  same  sort  of  property  as 
the  rolling  stock,  roadbed  and  depot  grounds,  but  it  is 
equally  with  them  covered  by  the  general  term  '  the  prop- 
erty of  the  company,'  and  therefore  equally  mthin  the 
protection  of  the  charter." 

§  69.   Conditional  exemptions  from  taxation. 

The  power  to  make  exemption  from  taxation  includes 
the  power  to  make  it  subject  to  conditions,  or  to  limit  to 
some  specific  form  of  taxation.  Thus  a  railroad  company 
may  by  grant  of  the  legislature  be  entitled  to  the  taxation 
of  its  property,  land  included,  upon  the  basis  of  a  per 
cent  upon  the  gross  earnings,  and  this  right  will  be  im- 
paired by  an  act  withdrawing  the  lands  from  this  arrange- 
ment and  subjecting  them  to  taxation  according  to  their 
cash  value. 2  The  exception  may  be  limited  to  a  term  of 
years,  or  conditioned  upon  the  completion  of  a  railroad 
wholly  or  in  part. 

1  Wilmington  R.  R.  Co.  v.  Reid,  13  Wallace,  264.  This  case  was  dis- 
tinguished in  Wilmington  Railroad  Co.  v.  ALsbrook,  146  U.  S.  301,  holding 
that  this  exemption  did  not  cover  a  branch  line  constructed  by  another 
company  under  a  different  charter. 

2  Stearns  v.  Minnesota,  179  U.  S.  223,  reversing  72  Minn.  200; 
Duluth  and  Iron  Range  R.  R.  Co.  v.  Minnesota,  179  U.  S.  302,  reversing 
77  Minn.  433. 


70  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    70 

§  70.   Contract  not  to  reduce  dividend  by  taxation  below 
fixed  per  cent  sustained. 

Ill  a  Tennessee  case  the  road  with  its  fixtures,  including 
workshops,  warehouses  and  vehicles  of  transportation  was 
exempted  from  taxation  for  a  period  of  A^ears,  and  it  was 
further  provided  that  no  tax  should  ever  be  laid  on  said 
railroad  or  its  fixtures  which  would  reduce  its  dividend  to 
below  eight  per  ccnt.^  The  court  held  that  this  exemption 
thus  limited  was  valid;  that  the  word  "dividend"  had 
reference  to  dividends  on  the  capital  stock  of  the  company 
held  and  owned  by  its  shareholders,  and  that  the  term 
j)rofits  out  of  which  alone  dividends  can  be  declared 
denoted  what  remained  after  defraying  every  expense, 
including  loans  falling  due  as  well  as  the  interest  on  such 
loans. 

It  was  claimed  that  the  exemption  clause  had  no  opera- 
tion if  the  company  earned  no  money  for  a  dividend,  be- 
cause in  that  event  the  dividends  could  not  be  reduced. 
But  the  court  said  that  this  theory  was  wholly  wanting  in 
plausibility,  as,  according  to  it,  the  company  would  be  tax- 
able when  it  made  no  profits,  and  only  get  the  benefit  of 
the  exemption  when  profits  of  a  certain  amount  were  real- 
ized. In  answer  to  the  objection  that  the  company  could 
so  keep  its  accounts  or  water  its  stock  that  it  would  never 
earn  any  dividends  of  eight  per  cent,  the  court  said,  p.  506 
(four  judges  dissenting)  :  — 

"  In  dealing  with  an  exemption  from  taxation,  like  that 
under  consideration,  good  faith  is  required  on  the  part  of 
both  parties  to  the  contract.  While  the  State  may  not  im- 
pair or  restrict  its  oj^eration,  neither  may  the  railroad  com- 
pany enlarge  it  at  will  and  without  limitation.  It  is  not 
shown  that  the  railroad  company  has  made  any  improper 
or  fictitious  increase,  either  of  its   capital  stock   or  of  its 

1  Mobile  &  Ohio  R.  R.  Co.  v.  Tennessee,  153  U.  S.  486. 


§   71  IMPAIRMENT   OF    OBLIGATION    OF   CONTRACTS.  71 

bonded  indebtedness.  On  the  contraiy,  the  proof  establishes 
that  the  par  value  of  the  53,206  shares  of  capital  stock  out.- 
standing  was  realized  therefor,  dollar  for  dollar,  and  this 
amount  of  capital  stock,  together  with  the  bonded  indebt- 
edness of  the  company,  represents  the  coat  of  constructing 
and  equipping  the  railroad.  The  legislature,  in  granting 
the  exemption  in  question,  doubtless  had  in  contemplation 
the  cost  of  the  enterprise,  and  may  have  intended  the  im- 
munity from  taxation  to  be  estimated  on  that  basis,  as  in 
the  Mississippi  charter. 

But  however  this  may  be,  in  sustaining  the  validity  of 
the  exemption  in  the  present  case  we  do  not  mean  to  be 
understood  as  holding  that  the  railroad  company  has  the 
right  in  its  discretion,  hereafter,  to  issue  additional  capital 
stock,  or  to  increase  its  bonded  indebtedness,  even  for  legiti- 
mate purposes,  and  have  the  same  taken  into  consideration 
upon  the  question  of  its  liability  for  taxation  under  the  eight 
per  cent  dividend  clause  of  the  charter." 

§  71,  Tax  on  foreign  held  securities. 

In  another  class  of  cases,  the  right  of  protection  against 
taxation  as  an  impairment  of  a  contract  has  been  sustained 
as  necessarily  implied  in  the  contract,  though  not  expressly 
stated.  This  includes  the  levy  of  a  tax  by  a  State  or  mu- 
nicipality upon  foreign  held  securities. 

The  question  Was  presented  in  the  case  of  the  Foreign 
Held  Bonds, ^  where  it  was  held  that  the  law  of  Pennsylvania 
requiring  the  treasurer  of  a  railroad  company  incori)orati'd 
and  doing  business  within  the  State,  to  retain  five  per  cent 
of  the  interest  due  on  bonds  of  the  road  payable  out  of  the 
State  to   non-residents  of  the  State  and  held  by  them,  was 

1  15  Wallace,  300;  this  case  has  been  questioned  on  another  point,  i.  e., 
as  to  the  situs  of  a  mortgage  for  taxation,  see  Savings  Society  v.  Mult- 
nomah County,  169  U.  S. 421. 


72  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    72 

a  law  interfering  between  the  company  and  the  bondholder, 
and,  under  the  pretense  of  levying  a  tax,  impairing  the 
oblio-ation  of  the  contract  between  the  parties.  The  court 
said  that  the  bonds  issued  by  the  railroad  company  were 
undoubtedly  property,  but  property  in  the  hands  of  the 
holders,  not  property  of  the  obligors,  and  that  so  far  as 
they  were  held  by  non-residents  of  the  State  they  were 
property  beyond  the  jurisdiction  of  the  State.  It  said 
further  that  the  obhgation  of  a  contract  depends  upon  its 
terms  and  the  means  which  the  law  in  existence  at  the  time 
it  was  made  affords  for  its  enforcement.  A  law,  which 
alters  the  terms  of  a  contract,  by  imposing  new  conditions 
or  dispensing  with  those  expressed,  impairs  its  obligation, 
for  as  stated  on  another  occasion,  such  a  law  relieves  the 
parties  from  the  moral  duty  of '  performing  the  original 
stipulations  of  the  contract  and  it  prevents  their  legal 
enforcement.^ 

§  72.  Taxation    by    State    or    municipality    of    its    own 
securities. 

The  same  principle  was  applied  in  the  case  of  an 
attempted  taxation  by  a  municipality  of  its  own  securities 
held  by  non-residents. ^  Such  a  tax  was  levied  by  the  city 
of  Charleston,  and  it  was  provided  by  the  ordinance  that 
the  treasurer  should  retain  this  tax  out  of  the  interest  pay- 
able to  the  security  holders.  But,  as  to  a  non-resident 
holder,  the  tax  was  void.^     It  was  said  at  page  445 :  — 

"  The  truth  is,  States  and  cities,  when  they  borrow 
money  and  contract  to  repay  it  with  interest,  are  not  acting 
as  sovereignties.     They  come  down  to  the  level  of  ordinary 

1  Murray  v.  Charleston,  96  U.  S.  432.  This  case  was  distinguished  in 
People  V.  Commissioners,  76  N.  Y.  77,  holding  bonds  issued  by  the  city 
of  New  York  in  the  hands  of  residents  of  the  State  not  exempt. 

2  Murray  v.  Charleston,  supra. 

3  See  infra,  Chapter  XIV,  "  Situs  of  Property  for  Taxation.'' 


§   72  IMPAIRMENT   OF    OBLIGATION   OF   CONTRACTS.  73 

individuals.  Their  contracts  have  the  same  meaning  as 
that  of  similar  contracts  between  private  persons.  Hence, 
instead  of  there  being  in  the  undertaking  of  a  State  or  city 
to  pa  J,  a  reservation  of  a  sovereign  right  to  withhold  pay- 
ment, the  contract  should  be  regarded  as  an  assurance 
that  such  a  right  will  not  be  exercised.  A  promise  to  pay, 
with  a  reserved  right  to  deny  or  change  the  effect  of  the 
promise,  is  an  absurdity." 

The  court  in  this  opinion  says  that  it  was  referred  to  de- 
cisions in  Ohio  and  California, ^  in  which  the  power  of  the 
State  to  tax  its  own  bonds  was  sustained.  But  they  were 
not  in  point  on  the  question  at  issue,  which  was  the  right 
of  a  municipality  to  tax  its  own  securities  held  by  non- 
residents, by  withholding  the  amount  of  the  tax  from  the 
interest ;  and  even  if  they  were  in  conflict  with  the  decision 
of  the  case  at  bar,  they  would  not  control  the  judgment  of 
the  court,  on  the  meaning  and  extent  of  the  Federal  Con- 
stitution. The  opinion  was  confined  to  holding  that  no 
municipality  can  by  its  ordinances,  under  the  guise  of  taxa- 
tion, relieve  itself  from  performing  to  the  letter  all  that  it 
expressly  promises  to  its  creditors.  The  court  said  that  it 
did  not  care  to  enter  upon  the  consideration  of  the  question 
whether  a  State  can  tax  a  debt  due  by  one  of  its  own  citi- 
zens or  municipalities  to  a  non-resident  creditor,  or  whether 
it  has  any  jurisdiction  over  such  a  creditor,  or  over  the 
credit  he  owns.^ 

In  a  later  case  this  question  was  again  considered  by  the 
court,^  in  one  of  the  Virginia  coupon  cases,  supra.  It  held 
that  the  act  of  Virginia  requiring  the  tax  on  the  bonds  to 
be  deducted  from  the  coupons  when  tendered  in  payment 
of  taxes  could  not  be  applied  to  coupons  separated  from 

1  Champaign  County  Bank  v.  Smith,  7  Ohio  St.  42;  People  v.  Home 
Ins.  Co.,  29  Cal.  533. 

2  Justice  Miller  and  Justice  Hunt  dissented. 

3  Hartnian  v.  Greenhow,  102  U.  S.  672. 


74  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    72 

the  bonds  and  held  by  different  owners,  without  impairing 
the  contract  made  in  the  funding  act,  see  supra,  §  53.  The 
court  remarked  further,  at  page  6<S3  :  — 

"  The  power  of  the  State  to  impose  a  tax  upon  her  own 
obligations  is  a  subject  upon  which  there  has  been  a  differ- 
ence of  opinion  among  jurists  and  statesmen.  On  the  one 
hand,  it  has  been  contended  that  such  a  tax  is  in  conflict 
with  and  contrary  to  the  obligation  assumed;  that  the  ob- 
ligation to  pay  a  certain  sum  is  inconsistent  with  a  right, 
at  the  same  time,  to  retain  a  portion  of  it  in  the  shape  of 
a  tax,  and  that  to  impose  such  a  tax  is,  therefore, 
to  violate  a  promise  of  the  government."  It  cited 
Hamilton  on  Public  Credit,  3d  vol.,  pp.  514-518,* 
and  added  that  "  on  the  other  hand  it  is  urged  that  the 
bonds  of  every  State  are  property  in  the  hands  of  its  cred- 
itors and  as  such  they  should  bear  their  due  proportion  of 
the  public  burdens."  But  this  question  was  not  necessar- 
ily involved  in  the  disposition  of  the  case.  The  court  con- 
tinued, "  whatever  may  be  the  wise  rule — looking  at  the 
necessity  of  a  commercial  country  for  its  prosperity,  that 
its  public  credit  should  never  be  impaired,  as  to  the  taxa- 
bility of  the  public  securities,  it  is  settled  that  any  tax 
levied  upon  them  cannot  be  withheld  from  the  interest 
payable  thereon." 

This  principle  was  applied  in  the  United  States  Circuit 
Court  of  Louisiana, 2  where  an  injunction  was  granted 
restraining  the  assessment  and  collection  of  taxes  upon 
judgments  held  by  non-residents  against  the  city  of  New 
Orleans,  that  is,  an  attempt  by  the  city  to  collect  taxes 
upon  judgments  against  itself.  The  bonds  on  which  the 
judgments  had  been  recovered  were  specially  exempted 
from  taxation  by  the  city  charter,  and  the  court  held  that 

1  See  Murray  v.  Charleston,  96  U.  S.  432,  supra,  and  Foreign  Held 
Bonds  Case,  15  Wall.  300,  supra,  p.  71.  . 

2  De  Vignier  v.  New  Orleans,  16  Fed.  Rep.  11. 


§    7.)  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  75 

the  judgQients  were  entitled  to  the  same  exemption,  and 
that,  independently  of  this,  in  the  absence  of  any  provisions 
in  the  contract  giving  the  right  to  impose  a  tax,  it  could 
not  be  imposed  upon  non-residents  without  impairing  the 
obligation  itself. 

§  73.  Contract  I'ight  to  tax  as  a  remedy. 

The  contract  clause  of  the  Constitution  has  been  applied 
to  another  class  of  cases,  where  parties  have  been  adjudged 
entitled  to  a  levy  of  taxes  in  the  enforcement  of  claims 
against  municipalities.  Here  was  involved  the  same  prin- 
ciple which  was  enforced  in  the  Virginia  coupon  cases,  as 
the  principle  applied  in  both  classes  of  cases  is  the  familiar 
rule  that  the  remedy  for  the  enforcement  of  the  contract  ex- 
isting when  it  is  made  enters  into  it,  and  cannot  be  destroyed 
or  prejudicially  affected,  without  impairing  its  obligation.' 
Thus  when  a  municipality  is  authorized  to  incur  debts  and 
issue  bonds,  the  power  of  taxation  then  existing  is  part  of 
the  contract  within  the  meaning  of  the  Constitution,  and  a 
subsequent  statute  which  repeals  or  restricts  the  power  of 
taxation  is  an  impairment  of  such  contract. 

The  leading  case  on  this  subject  is  Von  Hoffman  v. 
Quincy,^  where  the  statute  of  Illinois  at  the  time  the 
bonds  were  issued  authorized  the  levying  of  a  sufficient 
special  tax  to  pay  the  coupons  as  they  fell  due,  and  this  law 
was  subsequently  repealed,  so  that  the  only  tax  allowed  to 
be  levied  was  insufficient  to  meet  the  debt  and  current  ex- 
penses of  the  city.  The  court  said  that  the  power  of  taxa- 
tion thus  given  was  a  contract  within  the  meaning  of  the 
Constitution  and  could  not  be  withdrawn  until  the  contract 
was  satisfied,  and  that  it  was  the  duty  of  the  city  to  impose 
and  collect  the  taxes  in  all?*  respects  as  if  the  second  statute 

1  Bronson  u.  Kinzie,  I  How.  311. 

2  4  Wallace,  535. 


76  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    73 

had  not  been  passed,  and  this  duty  would  be  enforced  by 
mandamus.  This  ruling  has  been  followed  in  numerous 
cases  involving  the  enforcement  of  taxation  for  the  payment 
of  municipal  bonds. ^ 

In  the  case  last  cited  it  was  argued  that  the  power  of 
taxation  belongs  exclusively  to  the  legislative  department 
of  the  government,  that  the  extent  to  which  it  may  be 
delegated  to  municipal  bodies  is  a  matter  of  discretion,  and 
that  in  general  the  power  may  be  revoked  at  the  pleasure 
of  the  legislature.  But  the  court  said  that  legislation 
revoking  the  power  of  taxation  was  subject  to  the  quahfica- 
tion  that  attends  all  State  legislation,  that  it  shall  not 
conflict  with  the  'prohibitions  of  the  Constitution  of  the 
United  States,  and,  among  other  things,  shall  not  oper- 
ate directly  upon  contracts  of  the  corporation,  so  as  to  im- 
pair their  obligation  by  abrogating  or  lessening  the  means 
of  their  enforcement.  It  was  urged  in  Louisiana  v.  Pils- 
bury  that  the  people  of  New  Orleans  had  been  impoverished 
by  the  abolition  of  slavery  and  disabled  from  perform- 
ing the  contract  according  to  its  terms.  The  court  said 
that  the  obligation  of  the  city  to  perform  its  contract 
was  no  more  lessened  by  the  fact  that  there  were  no  longer 
slaves  to  be  taxed  than  it  would  be  by  the  destruction  of 
any  other  portion  of  the  taxable  property,  although  the 
taxation  on  what  was  left  might  be  thereby  increased. 

Thus  a  statute  of  Missouri  providing  that  no  tax  other 
than  for  current  expenditures  and  schools  and  interest  on 
the  State  bonds  should  be  levied  without  an  order  of  the 
Circuit  Court,  was  void  as  to  bonds  issued  prior  to  its 
enactment.  2 


1  Wolff??.  New  Orleans,  103 U.  S. 358;  Louisiana w.Pilsbury,  105  U.S. 278. 

2  Uaited  States  v.  Liucola  County,  5  Dillon,  184;  United  States  v. 
Johnson  County,  5  Dillon,  207;  Ralls  County  Court  v.  United  States,  105 
U.  S.  733;  see  author's  "  Taxation  in  Missouri,"  pp.  71  to  81,  as  to  conflict 
between  State  and  Federal  courts  on  this  question  in  State  of  Missouri. 


§    75        IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  77 

§  74.  Remedy  may  be  clianged,  if  svibstantial  right  not 
impaired. 

The  principle  repeatedly  enforced  by  the  court  has  been 
declared  in  these  Avords  (122  U.  S.,  p.  294):  — 

"  It  is  competent  for  the  States  to  change  the  form  of 
the  remedy,  or  to  modify  it  otherwise  as  they  may  see  fit, 
provided  no  substantial  right  secured  by  the  contract  is 
thereby  impaired.  No  attempt  has  been  made  to  fix  defin- 
itely the  line  between  alterations  of  the  remedy  which  are 
to  be  deemed  legitimate  and  those  which,  under  the  form 
of  modifying  the  remedy,  impair  substantial  rights.  -Every 
case  must  be  determined  upon  its  own  circumstances.  When- 
ever the  result  last  mentioned  is  produced  the  act  is  within  the 
prohibition  of  the  Constitution,  and  to  that  extent  void."  * 

But  where  the  charter  of  the  city  was  repealed  and  the 
State  had  taken  control  and  custody  of  her  public  property 
and  assumed  the  collection  of  the  taxes  previously  levied, 
the  Supreme  Court  held  that  the  taxes  levied  before  the 
repeal  of  the  charter  that  were  not  paid  could  not  be  col- 
lected through  the  instrumentality  of  a  court  of  chancery 
at  the  instance  of  creditors  of  the  city.  Such  taxes  could 
only  be  collected  under  authority  of  the  legislature. ^ 

§  75.  Contractual  and  governmental  legislation  distin- 
guished. 

While  the  State  may  by  legislative  act  exempt  from  tax- 
ation, if  not  prohibited  by  the  State  constitution,  such 
exemption  can  only  be  effected  by  contractual,  as  distin- 
guished from  governmental,  legislation. 

1  Seibeitu.  Lewis,  122  U.  S.  284;  Louisiana  v.  New  Orleans,  102  U.  S. 
203;  Von  Hoffman  u.  Quincy,  4  Wall.  535;  Morgan  v.  Town  Clerl?,  7  Wall. 
610;  Morgan  ».  Beloit,  7  Wall.  613;  Stuart  ».  Jefferson  Police  Jury,  116 
U.  S.  135. 

2  Meriwether  v.  Garrett,  102  U.  S.  472,  Justices  Strong,  Swayne  and 
Harlan  dissenting. 


78  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §    77 

Thus  a  statute  of  a  State  taxing  inheritances  does  not 
impair  any  contract  rights  of  inheritance,  even  if  such  an 
act  could  be  construed  as  a  change  in  thehiw  of  succession, 
rather  than  as  a  fiscal  imposition,  and  could  not  be  held  to 
violate  the  Constitution  of  the  United  States.^  Neither 
does  the  enactment  of  an  inheritance  tax  law  constitute  a 
contract  between  the  State  and  the  person  living  at  the  time 
of  its  enactment  that  if  he  shall  die  while  the  law  is  in  full 
operation  and  unchanged,  he  may  dispose  of  his  estate  with- 
out the  imposition  of  any  further  tax  upon  any  rights  or  in- 
terests acquired  under  his  will  than  the  tax  imposed  by  law.^ 

§  76.  Municipal  charter  powers  not  contractual. 

An  act  of  New  Jersey,  providing  that  certain  property  of 
New  Brunswick,  used  for  charitable  purposes,  should  be  sub- 
ject to  taxation  by  the  township  in  which  it  was  located, 
was  an  exercise  of  governmental  power  and  subject  to 
repeal.^  It  did  not  create  a  contract  between  the  State 
and  the  township.  The  conferring  such  rights  of  taxation 
is  the  exercise  by  the  legislature  of  a  public  and  govern- 
mental power ;  it  is  the  imparting  to  the  township  of  a 
portion  of  the  power  belonging  to  the  State,  which  it  can 
lawfully  impart  to  a  subordinate  municipal  corporation. 
But  from  the  very  character  of  the  power  it  cannot  be 
imparted  in  perpetuity,  and  is  always  subject  to  revocation, 
modification  and  control  by  the  legislative  authority  of  the 
State. 

§  77.   State  exemption   of  municipal   property   not   con- 
tractual. 

An  act  of  Kentucky  exempted  from  State,  county  and 
city  taxation  the    water  works  of  the  city  of  Covington. 

1  Carpenter  ».  Pennsylvania,  17  How.  456;  Orr  t?.  Gllman,  183  U.  S.  278. 

2  la  re  Vanderbilt,  50  N.  Y.  App.  Div.  246. 

3  Williams  v.  New  Jersey,  130  U.  S.  189. 


§   78  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  79 

The  Kentucky  Court  of  Appeals  held  that  the  water  works 
were  the  proprietary  property  of  the  citizens  as  distin- 
guished from  the  property  held  for  public  or  governmental 
purposes,  and  were  therefore  subject  to  taxation  under 
the  new  constitution,  notwithstanding  the  exemption  of  all 
public  property  used  for  public  purposes.  The  Supreme 
Court  1  accepted  this  construction  of  the  Kentucky  statute, 
though  it  doubted  the  soundness  of  the  ruling  that  the 
water  works  were  not  held  for  governmental  purposes. 
But  it  agreed  with  the  Kentucky  court  that  the  exemption 
from  taxation  by  the  terms  of  the  act,  was  not  irrepcal- 
able;  and  said  further  that,  if  the  property  was  held  in  a 
governmental  not  a  proprietary  sense,  the  power  of  the 
legislature  as  to  such  property  was  still  supreme,  and  that 
the  charter  of  a  municipal  corporation  is  in  no  sense  a  con- 
tract  between  the  State  and  the  corporation. 

§  78.  State  control  of  proceeds  of  municipal  taxation. 

The  distinction  between  the  relation  of  the  State  to 
municipal  corporations  and  to  individuals  was  illustrated 
in  a  decision  of  the  Supreme  Court, ^  holding  that  a  State, 
unless  restrained  by  the  provisions  of  its  constitution,  can 
direct  a  restitution  to  the  taxpayers  of  a  county  or  other 
municipal  corporation  of  property  exacted  from  them  by 
taxation,  in  whatever  form  the  property  may  be  changed, 
so  long  as  it  remains  in  the  possession  of  the  municipal- 
ity. The  county  in  that  case  had,  under  legislative 
authority,  subscribed  to  stock  in  a  railroad  compan}^  to 
be  paid  by  a  special  tax  levied  for  that  purpose.  The 
legislature  enacted  a  law  providing  that  the  railroad 
company  should  issue  to  the  taxpayers  certiticates  for 
the  taxes  paid,   which  were  made  assignable,  and   it   was 


1  Covington  v.  Kentucky,  173  U.  S.  231. 

2  Board  of  Commissioners  v.  Lucas,  93  U.  S.  108. 


80  niPAIRMEXT    OF    OBLIGATIOX    OF    COXTEACTS.         §    79 

made  the  duty  of  the  company  to  issue  certificates  of  paid- 
up  capital  stock  to  the  amount  of  the  certificates  of  taxes  paid 
when  surrendered.  The  stock  unclaimed  was  issued  to  the 
common  school  fund.  The  act  declared  that  the  issuing  of 
the  stock  to  the  individuals  or  townships  should  cancel 
pro  tanfo  the  stock  held  by  the  county.  The  county 
claimed  that  the  act  impaired  the  obligation  between  it  and 
the  railroad,  but  the  Supreme  Court  held  that  it  was  witli- 
in  the  constitutional  power  of  the  State,  although  the  in- 
validity of  the  act  would  not  be  a  matter  of  serious  doubt 
between  the  State  and  private  individuals. 

§  79.  Retrospective  legislation  and  vested  rights. 

This  principle  of  distinguishing  between  governmental 
and  contractual  legislation  ha,3  been  applied  in  numerous 
cases.  Thus  it  has  been  held  that  the  holders  of  tax  cer- 
tificates have  no  vested  rights  impaired  by  requiring  them 
to  give  written  notice  to  the  occupant  of  the  land  of  appli- 
cation for  tax  deeds.     The  court  said :  ^ — 

*'  That  a  statute  is  not  void  because  it  is  retrospective  has 
been  repeatedly  held  by  this  court,  and  the  feature  of  the 
act  of  18(37,  which  makes  it  applicable  to  certificates 
already  issued  for  tax  sales,  does  not  of  itself  conflict  with 
the  Constitution  of  the  United  States.  Nor  does  every 
statute  which  affects  the  value  of  a  contract  impair  its  ob- 
ligation. It  is  one  of  the  contingencies  to  which  parties 
look  now  in  making  a  large  class  of  contracts,  that  they 
may  be  affected  in  many  ways  by  State  and  national  legis- 
lation. For  such  legislation  demanded  by  the  public  good, 
however  it  may  retroact  on  contracts  previously  made  and 
enhance  the  cost  and  difiiculty  of  performance,  or  diminish 
the  A^alue  of  such  performance  b}^  the  other  party,  th^re  is 

1  Curtis  V.  Whitney,  13  Wallace,  68;  see  Coulter  v.  Stafford,  6  C.  C.  A. 
18;  also  Essex  Public  Road  Board  v.  Skinkle,  UO  U.  S.  334. 


§   80  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  81 

no  restraint  in  the  Federal  Constitution,  so  long  as  the 
obligation  of  performance  remains  in  full  force." 

This  principle  is  farther  illustrated  by  a  case  from  New 
York,i  where  a  statute  modified,  in  the  taxpayers'  favor, 
previous  laws  of  limitation  concerning  lands  sold  for  non- 
payment of  taxes.  The  statute  had  theretofore  provided 
that  any  person  might,  at  the  sale  for  taxes,  on  advancing 
the  amount  of  the  unpaid  taxes,  have  a  lease  of  the  prem- 
ises for  a  stated  number  of  years.  This  was  amended  by 
providing  that,  where  the  sale  for  taxes  had  been  made 
more  than  eight  years  prior  to  the  passage  of  the  act  no 
action  should  be  maintained  to  compel  the  delivery  of  a 
lease  unless  commenced  within  six  months  after  the  date 
of  passage.  This  was  claimed  to  be  an  impairment  of  a 
contract  right,  but  the  Supreme  Court  held  that  there  was 
nothing  in  the  Constitution  of  the  United  States  which 
prevented  the  legislature  of  New  York  from  prescribing 
the  limitation  for  bringing  suits  where  none  had  previously 
existed,  or  from  shortening  the  time  within  which  suits 
should  be  commenced  to  enforce  existing-  rio-hts  under  taX 
sales,  provided  the  time  prescribed  by  the  new  law  was  a 
reasonable  one. 

§  80.  Justice  Miller  on  legislative  contracts. 

In  another  case  where  the  court  found  a  contract  in  a 
railroad  charter,  it  was  said,^  opinion  by  Justice  Miller, 
1.  c.p.  113:— 

"  It  may  safely  be  said  that  in  far  the  larger  number  of 

^  Wheeler  u,  Jackson,  137  U.  S.  245. 

2  New  Jersey  v.  Yard,  95  U.  S.  104;  State  ex  rel.  Schurz  v.  Cook,  148 
U.  S.  397;  Marxv.  Hanthorn,  30  Fed.  Rep.  579.  la  this  last  caj^e,  held  that 
while  the  legislature  may  make  recitals  of  regularity  of  prior  proceedings 
in  tax  deeds  ^jnma/acie  evidence,  it  cannot  make  them  conclusive  evi- 
dence of  those  proceedings  which  are  essential  to  the  validity  of  the 
transaction,  without  impairing  the  obligation  of  the  contract  with  the 
purchaser  of  the  property;  but  aliter  as  to  non-essentials  or  matters  of 

6 


82  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS,        §    80 

cases  brought  to  this  court  under  that  clause  of  the  Consti- 
tution, the  question  has  been  as  to  the  existence  and  nature 
of  the  contract,  and  not  the  construction  of  the  law  which 
is  supposed  to  impair  it ;  and  the  greatest  trouble  we  have 
had  on  this  point  has  been  in  regard  to  what  may  be  called 
legislative  contracts, — contracts  found  in  statute  laws  of 
the  State,  if  they  existed  at  all.  It  has  become  the  estab- 
lished law  of  this  court  that  a  legislative  enactment,  in  the 
ordinary  form  of  a  statute,  may  contain  provisions  which, 
when  accepted  as  the  basis  of  action  by  individuals  or  cor- 
porations, become  contracts  between  them  and  the  State 
within  the  protection  of  the  clause  referred  to  of  the  Federal 
Constitution." 

After  saying  that  it  is  always  difficult  to  determine 
when  a  statute  constitutes  a  contract,  the  court  said:  — 

"  This  has  always  been  a  very  nice  point;  and,  when  the 
supposed  contract  exists  only  in  the  form  of  a  general  stat- 
ute, doubts  still  recur,  after  all  our  decisions  on  that 
class  of  questions."      *     *     * 

"  Statutes  fixing  the  taxes  to  be  levied  on  corporations, 
partake,  in  a  striking  manner,  of  this  dual  character,  and 
require  for  their  construction  a  critical  examination  of  their 
terms,  and  of  the  circumstances  under  which  thej^  are 
created. 

*'The  writer  of  this  opinion  has  always  believed,  and 
believes  now,  that  one  legislature  of  a  State  has  no  power 
to  bargain  away  the  rights  of  any  succeeding  legislature  to 
levy  taxes  in  as  full  a  manner  as  the  Constitution  will  per- 
mit.    But,  so  long  as  the  majority  of  this  court  adhere  to 

routine.  Sioux  City  R.  R.  Co.  v.  Sioux  City,  138  U.  S.  98;  Garrison  v. 
City  of  New  York,  21  Wall.  196;  Armstrong  v.  Athens  County,  16  Peters, 
281;  Covington  v.  Kentucliy,  173  U.  S.  231;  State  v.  Weyerhauser,  72 
Minn.  519,  holding  that  a  statute  providing  for  the  taxation  of  property 
previously  unlavpfuUy  omitted  from  the  assessment,  or  grossly  under- 
valued, does  not  impair  the  obligation  of  a  contracts 


§    83  IMPAIRMENT    OF    OBLIGATIOX    OF    CONTRACTS.  83 

the  contrary  doctrine,  he  must,  when  the  question  arises, 
join  with  the  other  judges  in  considering  whether  such  a 
contract  has  been  made." 


§  81.  Tax  exemption  not  implied  from  license. 

A  contract  right  of  exemption  cannot  be  implied  from 
the  grant  of  a  ferry  license,^  nor  from  an  exclusive  street 
railway  franchise,^  nor  from  a  license  to  practice  law,^  nor 
from  a  State  license  to  an  insurance  company  to  do  busi- 
ness in  the  State.* 

§  82.  Bounties  and  privileges. 

Legislative  grants  of  bounties  or  privileges,  involving  no 
reciprocal  contractual  obligations  on  the  part  of  the 
grantee,  confer  no  contractual  rights.  Thus  the  bounty 
and  tax  exemption  granted  to  salt  manufacturers  in  Michi- 
gan was  held  repealable,^  as  was  also  the  exemption  granted 
to  manufacturers  in  the  District  of  Columbia.® 

§  83.  Consideration  for  exemption  essential. 

If  the  law  is  a  mere  offer  of  a  bounty,  it  may  be  with- 
drawn at  any  time,  although  the  recipients  may  have  in- 
curred expense  on  the  faith  of  the  offer.  Thus  an  act  of 
Louisiana,  in  exempting  the  hall  of  a  Grand  Lodge  from 
State  and  parish  taxes,  as  long  as  it  was  occupied  as  a 
Grand  Lodge,  was  a  mere  continuing  gratuity  which  the 
State  had  a  right  to  withdraw  by  the  adoption  of  a  Con- 

1  Wiggins  Ferry  Co.  v.  East  St.  Louis,  107  U.  S.  305. 

2  New  Orleans  Railroad  Co.  v.  New  Orleans,  143  U.  S.  192;  disap- 
proving on  this  point  Gordon  v.  Appeals  Tax  Court,  supra. 

3  Baker  v.  Lexington  (Ky.).  21  Ky.  Law  Rep.  809. 
•*  Home  Insurance  Co,  v.  Augusta,  93  U.  S.  116. 

&  Salt  Co.  V.  East  Saginaw,  13  Wallace,  373. 
6  Welch  V.  Cook,  97  U.  S.  541. 


84  IMPAIRMENT   OF    OBLIGATION    OF    CONTRACTS.         §  85 

stitution  which  in  effect  repealed  the  exemption.^  The 
court  said  there  was  the  same  necessity  for  a  consideration 
to  make  a  contract  of  exemption  as  there  would  be  if  it 
were  a  contract  between  private  parties. 

§  84.  Judgment  for  torts  not  contract. 

Judgments  were  recovered  against  the  city  of  New  Or- 
leans for  damages  done  to  property  by  a  mob,  the  statutes 
of  the  State  making  municipaUties  liable  for  such  dama- 
ges. The  new  constitution,  thereafter  adopted,  so  limited 
the  taxing  power  of  the  city  as  to  prevent  the  plaintiffs 
from  collecting  their  judgments,  the  funds  receivable  hav- 
ing been  exhausted  by  current  expenses.  The  court  held^ 
that  thig  right  to  reimbursement  for  damages  caused  by  a 
mob,  while  a  statutory  right,  was  not  founded  upon  any 
contract  of  the  city  and  did  not  become  a  contract  by 
being  merged  in  a  judgment,  adding  at  page  288  :  — 

"  The  term  '  contract '  is  used  in  the  Constitution  in  its 
ordinary  sense,  as  signifying  the  agreement  of  two  or  more 
minds  for  considerations  proceeding  from  one  to  the  other, 
to  do  or  not  to  do  certain  acts.  Mutual  assent  to  its  terms 
is  of  its  very  essence." 

§  85.  Tax  exemption  repealed  under  general  power  re- 
served to  amend  or  repeal. 

After  the  decision  in  the  Dartmouth  College  case,  hold- 
ing that  corporate  charters  are  contracts  protected  by  the 
Constitution,  the  practice  became  general  in  the  States  of 
inserting    in    corporate    charters,    whether    contained   in 

1  Grand  Lodge  v.  New  Orleans,  106  U.  S.  143.  See  also  Rector  of 
Christ  Church  v.  Philadelphia,  24  Howard,  300;  Tucker  v.  Ferguson,  22 
Wallace,  527;  West  Winconsia  R.  R.  Co.  v.  Supervisors,  93  U.  S.  695; 
Newton  v.  Commissioners,  100  U.  S.  548. 

2  Louisiana  v.  Mayor  oi  New  Orleans,  109  U.  S.  285. 


§   85  I3IPAIEMENT    OF    OBLIGATIOX    OF    CONTRACTS.  85 

special  acts  or  in  general  corporation  laws,  the  reservation 
of  tlie  power  to  alter,  amend  or  repeal.  Where,  in  a 
charter  granting  an  exemption  from  taxation,  such  reserva- 
tion is  made,  whether  it  is  contained  in  the  act  itself,  or 
in  any  other  act  which  by  reference  is  made  part  of  it,  or 
in  the  State  statute  c(jntrolling  the  terms  of  the  act,  itpre- 
sen-es  to  the  State  the  right  of  amending  or  repealing  the 
tax  exemption  whenever  the  public  interest  as  determined 
by  the  legislature  requires. 

Thus  in  a  case  from  South  Carolina,  where  the  immumty 
from  taxation  was  orranted  bv  an  amendment  of  the  ori<''-inal 
charter  of  the  railroad,  and  at  the  same  time  a  general  law 
of  the  State  was  in  existence  providing  that  any  charter 
subsequently  granted,  or  any  renewal,  amendment  or  modi- 
fication of  a  charter,  should  be  subject  to  amendment, 
alteration  or  repeal  b}^  legislative  authority,  the  court 
hekP  that  the  original  incorporators  and  the  subsequent 
stockholders  took  their  interests  with  knowledge  of  the 
existence  of  this  power  and  of  the  possibility  of  its  exercise 
at  anv  time,  at  the  discretion  of  the  legislature.  The 
object  of  the  resen^ations,  just  as  is  true  of  similar  reserv- 
ations in  other  charters,  was  to  prevent  a  grant  of  cor- 
porate rights  and  privileges  in  any  form  which  would 
preclude  legislative  interference  vrith  their  exercise,  if  the 
public  interest  should  at  any  time  require  such  interference. 
The  court  added  however  as  to  the  effect  of  this  reserved 
power,  at  page  459  :  — 

"Eights  acquired  by  third  parties,  and  which  have  be- 
come vested  under  the  charter,  in  the  legitimate  exercise 
of  its  powers  stand  upon  a  different  footing;  but  of  such 
rights  it  is  unnecessary  to  speak  here.  The  State  only 
asserts  in  the  present  case  the  power  under  the  reservation 
to  modify  its  own  contract  with  the  incorporators ;   it  does 

^  Tomlinsoa  v.  Jessup,  15  Wall.  454. 


86      IMPAIRMENT  OF  OBLIGATIOX  OF  CONTRACTS.    §  86 

not  conteud  for  a  power  to  revoke  the  contracts  of  the 
corporation  with  other  partie's,  or  to  impair  au}^  vested 
rights  thereby  acquired." 

This  ruling  has  been  followed  in  a  number  of  cases. ^ 

§  86.  Tax  exemptions  strictly  construed. 

A  contract  for  exemption  from  taxation  must  not  only 
be  founded  upon  a  consideration,  but  it  must  be  clearly 
stated  and  will  not  be  inferred  from  facts  which  do  not 
irresistibl}^  point  to  the  existence  of  a  contract. ^  This 
principle  has  been  applied  in  numerous  cases.  Thus  the 
exemption  of  a  railroad  from  taxation  does  not  extend  to 
the  branches  of  the  road  constructed  under  a  subsequent 
act.^  The  exemption  of  the  property  and  effects  of  a  rail- 
road company  does  not  extend  to  property  other  than  that 
used  in  the  business  of  the  company,  nor  to  the  land  of  the 
company.*     Where  a  bank  was  to  pay  an  annual  tax  upon. 


1  Louisville  Water  Co.  v.  Claik,  143  U.  S.  1;  Railroad  Co.  v.  Maine,  90 
U.  S.  499 ;  Hoge  v.  Railroad  Co.,  99  U.  S.  348 ;  New  York,  etc.,  Railroad  Co. 
V.  Bristol,  151  U.  S.  556 .  In  tbe  last  case  the  court  repeated  what  had  been 
said  in  previous  cases,  page  567 :  That  a  power  reserved  to  the  legislature 
to  alter,  amend  or  repeal  charters,  authorizes  it  to  make  any  alteration 
or  amendment  of  a  charter  granted  subject  to  it,  which  will  not  defeat 
or  substantially  impair  the  object  of  the  grant  or  any  rights  vested  under 
it  and  which  the  legislature  miy  deem  necessary  to  secure  that  object 
or  any  public  right.     The  power  of  alteration  and  amendment  is  not 

-without  limitation,  but  must  be  in  good  faith  and  consistent  with  the 
specified  object  of  the  charter.  See  Jackson,  J.,  afterwards  Justice  of 
the  Supreme  Court  in  Hill  v.  Railroad  Co.,  41  Fed.  Rep,  610;  San 
Joaquin  &  Kings  River  Co.  v.  Stanislaus  County,  113  Fed.  Rep.  930,  in 
the  Circuit  Court  Northern  District  of  California;  Shields  v.  Ohio,  95 
U.  S.  319. 

2  Wells  V.  Savannah,  181  U.  S.  531. 

3  C.  B.  &  Kansas  City  R.  Co.  v.  Guffey,  120  U.  S.  569;  Ford  v.  Delta 
&  Pine  Land  Co.,  164  U.  S.  662;  Southwestern  R.  Co.  v.  Wright,  116  U.S. 
231;  Wilmington  &  Weldon  R.  Co.  v.  Alsbrook,  146  U.  S.  279. 

4  Ford  V.  Delta  Pine  Land  Co.,  supra;  Tucker  v.  Ferguson,  22  Wall. 
527;  Railroad  Co.  v.  Loftin,  105  U.  S.  258. 


§   87  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  87 

its  shares,  which  was  to  be  in  lieu  of  all  other  taxes,  and  it 
was  authorized  to  hold  real  estate  sufficient  for  its  place  of 
business,  the  immunity  from  taxation  was  held  to  extend 
only  to  so  much  of  the  building  as  Avas  required  for  the 
actual  wants  of  the  bank.^  Where  the  exemption  from 
taxation  is  limited  in  time,  or  is  to  continue  only  until  the 
happening  of  a  certain  event,  as  the  completion  of  the 
railroad,  such  limitation  is  strictly  enforced.^ 

An  exemption  for  a  definite  time  is  equivalent  to  the 
express  power  to  tax  after  that  time.^ 

§  87.  "  Immunity"  and  *' privilege  "  distinguished. 

The  later  decisions  of  the  court  in  requiring  that  the 
contract  of  exemption  must  be  clearly  stated,  are  materially 
more  stringent.  It  was  said  by  the  court  in  a  recent  opin- 
ion,* 1.  c.  page  179:  "It  cannot  be  denied  that  the 
decisions  of  this  court  are  somewhat  involved  in  relation  to 
this  question  of  exemption.  It  is  difficult  in  some  cases  to 
distinguish  the  language  used  in  each  so  far  as  the  results 
arrived  at  by  the  court  can  be  seen  to  be  founded  on  a  real 
difference  in  the  meaning  of  such  lanouaore." 

In  this  case  the  plaintiff  had  been  chartered  with  "  all  the 
rights  and  privileges  "  of  another  company,  which  in  turn 
had  been  granted ' '  all  the  rights,  privileges  and  immunities ' ' 
of  a -third  company,  the  last  having  a  limited  exemption 
from  taxation.  It  was  held  that  this  did  not  give  the  first 
named  company  any  exemption.  Exemption  from  taxa- 
tion, it  was  said,  is  more  accurately  described  as  an  "  im- 
munity "  than  as  a  "  privilege,"  and  the  later  opinions  of 
the  court  show  that  there  must  be  other  lanjj-uao-e  than  the 

1  Bank  v.  Tennessee,  104  U.  S.  493. 

2  Bailey  u.  Majiwire,  22  Wallace,  215. 

3  Railroad  Co.  v.  Gaines,  97  U.  S.  697;  Vicksburg  R.  Co.  v.  Dennis, 
116  U.  S.  665. 

*  Fhoenix  Fire  &  Marine  Ins.  Co.  v.  Tennessee,  161  U.  S.  174. 


88  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.        §    89 

mere  word  "  privilege,"  or  other  provisions  in  the  stat- 
ute removing  all  doubt  as  to  the  intention  of  the  legisla- 
ture, before  the  exemption  will  be  admitted.  The  court 
conceded  that  some  of  its  earlier  decisions  are  inconsist- 
ent with  this  ruling.^  It  laid  stress  in  this  case  upon  the 
absence  of  the  word  "  immunity." 

In  another  case  decided  at  the  same  time^  the  court  held 
that,  where  a  company  was  organized  with  "  all  the  powers, 
rights,  resen'ations  and  liabilities  of  another  company," 
the  former  was  not  entitled  to  the  limitation  of  taxation 
provided  in  the  charter  of  the  latter  company  . 

§  88.  Lost  by  cliange  of  corporate  business. 

So  also  an  exemptipn  granted  to  a  corporation  for  the 
transaction  of  a  particular  business,  is  lost  by  a  charter 
change  in  the  business  accepted  by  the  corporation.  Thus 
an  insurance  company  with  a  chartered  limitation  of  taxa- 
tion, secured  a  change  of  its  cor]:)orate  business  and 
objects  to  those  of  a  bank.  Prior  to  this  the  new  consti- 
tution of  the  State  had  prohi})ited  all  exemption.  The 
court  held  that  this  change  from  insurance  to  banking 
was  material  and  radical  and  that  the  exemption  was  lost.* 

§  89.  Lost  by   repeal   before   in  corporation  or   issue   of 
stock. 

A  corporation  chartered  before  the  adoption  of  a  new 
constitution  but  not  actually  organized  until  after  its 'adop- 
tion, was  held  subject  to  the  provisions  of  the  new  consti- 
tution, which  nullified  the  tax  limitation  contained  in  the 
charter.* 


1  Haraphrey  w.  Pesiaes,  supra;  Tennessee  v,  Whitworth,  infra, 

2  Home  Insurance  Co.  v.  Tennessee,  IGl  U.  S.  198 
s  Memphis  City  Bank  v.  Tennessee,  161  U.  S.  186. 

*  Planters'  Insurance  Co.  v.  Tennessee,  161  U.  S.  193. 


§  91         IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  89 

And  new  stock  issued  after  the  adoption  of  a  constitu- 
tion forbidding  tax  exemptions  is  not  entitled  to  the 
exemption  from  taxation  granted  to  the  original  stock- 
holders. 


§  90.  Tax  exemption  is  a  personal  immunity. 

A  contract  of  tax  exemption  is  an  immunitj'  personal  to 
the  grantee,  and  cannot  be  enforced  b}'  an  assignee  or  pur- 
chaser at  foreclosure  sale  or  otherwise,  unless  the  ri^ht 
to  assign  such  immunitj^  is  clearly  given  in  the  grant. ^ 

Thus  in  the  case  of  a  railroad  corporation  exempted  from 
taxation  upon  its  property  and  purchased  at  sale  in  fore- 
closure by  a  company  declared  hy  statute  to  succeed  to  all 
the  franchises,  rights  and  privileges  of  the  first  company,  it 
was  held  that  the  immunitj'  from  taxation  did  not  pass  to 
the  purchaser. 3  It  was  urged  that  it  passed  under  the 
word  "franchise;"  but  on  this  point  the  court  said, 
quoting  Morgan  v.  Louisiana,  93  U.  S.  217,  223,  1.  c. 
page  185 :  — 

§  91.  Transferable  franchise  defined. 

"Much  confusion  of  thought  has  arisen  in  this  case  and 
in  similar  cases  from  attaching  a  vague  and  undefined 
meaning  to  the  term  'franchises.'  It  is  often  used  as 
synonymous  with  rights,  privileges,  and  immunities,  though 
of  a  personal  and  temporary  character;  so  that,  if  any  one 
of  these  exists,  it  is  loosely  termed  a  'franchise,'  aud  is 
supposed  to  pass  upon  a  transfer  of  the  franchises  of  the 

^  Bank  of  Commerce  v.  Tennessee,  1G3  U.  S.  416. 

2  Trask  r.  Maguire,  18  Wall.  391 ;  Morgan  v.  Louisiana,  93  U.  S.  222; 
Railroad  Co.  v.  Hamblen,  102  U.  S.  273;  Wilson  p.  Gaines,  K 3  U.  S. 
417;  L.  &N.  R.  R.  Co.  v.  Palmes,  109  U.  S.  244;  Memphis  Railroad  Co. 
V.  Commissioners,  112  U.  S.  609;  Picard  v.  Tennessee  &c.  R.  Co., 
130  U.  8.  637;  C.  &  O.  R,  R.  Co.  v.  Miller,  114  U.  S.  176. 

8  C.  &  O.  R.  R.  Co.  «.  Miller,  supra. 


90  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.         §   92 

company.  But  the  term  must  always  be  considered  in  con- 
nection with  the  corporation  or  property  to  which  it  is 
alleged  to  appertain.  The  franchises  of  a  railroad  corpora- 
tion are  rights  or  privileges  which  are  essential  to  the 
operations  of  the  corporation,  and  .without  which  its  road 
and  works  would  be  of  little  value ;  such  as  the  franchise 
to  run  cars,  to  take  tolls,  to  appropriate  earth  and  gravel 
for  the  bed  of  its  road,  or  water  for  its  engines,  and  the 
like.  They  are  positive  rights  or  privileges,  without  the 
possession  of  which  the  road  of  the  company  could  not  be 
successfully  worked.  Immunity  from  taxation  is  not  one 
of  them.  The  former  may  be  conveyed  to  a  purchaser  of 
the  road  as  part  of  the  property  of  the  companj'^;  the 
latter  is  personal  and  incapable  of  transfer  without  express 
statutory  direction." 

§  92.  Railroad  consolidations  and  tax  exemptions. 

This  principle  has  been  applied  in  numerous  cases  of 
railroad  consolidations.  If  the  consolidation  of  two  com- 
panies does  not  necessarily  work  a  dissolution  of  both  and 
the  creation  of  a  new  corporation,  and  the  two  companies 
retain  their  original  status  toward  the  public  and  the  State, 
the  exemption  may  continue  as  if  the  consolidation  had  not 
taken  place,  limited  however  to  the  corporate  property 
on  which  it  was  originally  granted.^ 

Thus  where  two  railroad  corporations,  whose  shares  are 
by  a  State  statute  exempt  from  taxation  in  the  State,  con- 
solidate themselves  into  a  new  company  under  a  State  law 
which  makes  no  provision  to  the  contrary,  and  issue  shares 
in  the  fiew  company  in  exchange  for  shares  in  the  old  com- 
panies, the  same  exemption  applies.^ 

*  Central  Railroad  &  Banking  Co.  v.  Georgia,  92  U.  S.  665;  Branch  v. 
City  of  Cliarleston,  92  U.  S.  677. 

2  Tennessee  v.  Whitworth,  117  U.  S.  129.  See  also  Tomlinson  w. 
Branch,  15  Wall.  460. 


§   93         IMPAIRMENT    OF    OBLIGATIOX    OF    CONTRACTS.  91 

The  same  exemption  was  held  to  apply  where  two  com- 
panies, whose  stock  was  exempt  in  one  State,  consolidated 
with  a  third  company  created  under  the  laws  of  another 
State.  The  new  stock  issued  was  held  exempt  from  tax- 
ation in  the  former  State,  in  the  absence  of  a  statute  there 
to  the  contrary. 1  If  the  stock  of  only  one  of  the  roads 
is  exempt  however,  the  exemption  will  be  limited  to  that 
j^art  of  the  consolidated  road. 

But  where  the  company  enjoying  an  exemption  is  con- 
solidated with  another  and  dissolved  in  the  new  corpora- 
tion, so  that  a  new  grant  of  the  corporate  franchise  is 
made,  such  new  corporation  becomes  subject  to  the  pro- 
visions of  the  State  statute  prohibiting  exemptions.^ 

§  93.  Corporate  exemption  limited    to  specific  form   of 
taxation. 

In  a  series  of  cases  known  as  the  Tennessee  Bank  and 
Insurance  Cases,  the  subject  of  the  application  of  contract 
exemption  to  the  different  forms  of  corporate  taxation  was 
thoroughly  considered. 

Where  the  charter  of  a  bank  provided  that  it  should  pay 
a  certain  tax  to  the  State  on  each  share  "  which  should  be 
in  lieu  of  all  other  taxes,"  a  subsequent  Liw  imposing  an 
additional  tax  on  the  shares  in  the  hands  of  the  share- 
holders was  void.''  The  court  enumerated  in  its  opinion 
some  of  the  different  subjects  of  corporate  taxation,  and 
said  that  this  enumeration  shows  the  searching  and  com- 
prehensive taxation  to  which  such  institutions  are  subjected 

1  Tennessee  v.  Whitvvortli,  117  U.  S.  139. 

2  St.  Louis,  Iron  Mtn.  &  So.  R.  Co.  v.  Berry,  113  U.  S.  4C5;  Railroad 
Co.  V.  Georgia,  98  U.  S.  359;  Yazoo  &  Miss.  Val.  R.  Co.  v.  Adams,  181 
U.  S.  580;  Keoljuk&  Western  R.  R.  Co.  v.  Missouri,  152  U.  S.  301. 

3  Farrington  v.  Tennessee,  95  U.  S.  679;  tliree  judges  dissented,  hold- 
ing that  the  exemption  was  of  the  stocii  and  property  of  the  corporation 
and  not  of  the  shareholders. 


92      IMPAIRMENT  OF  OBLIGATION  OF  CONTRACTS.    §  94 

where  there  is  no  protection  by  previous  compact.  In 
another  case,  Chief  Justice  "Waite,  for  the  court,  said:  ^  — 
"In  corporations  four  elements  of  taxable  value  are 
sometimes  found:  1,  franchise;  2,  capital  stock  in  the 
hands  of  the  corporation;  3,  corporate  property;  and  4, 
shares  of  the  capital  stock  in  the  hands  of  the  individual 
stockholders. " 

§  94.  The  property  of  corporations  and  sliareliolders  dis- 
tinguislied  in  contracts  of  exemption. 

The  disposition  of  the  Supreme  Court  in  later  cases  to 
construe  strictly  all  contracts  of  exemption  is  illustrated  by 
its  recoofnition  and  enforcement  of  the  leo;al  fiction  of  the 
distinction  between  the  property  of  the  corporation  and 
the  rights  of  the  shareholders  in  such  property.  Thus,  the 
court  said  '^  that,  although  there  were  expressions  in  the 
former  opinions  lending  color  to  another  view,  there  is  a 
distinction  between  the  capital  stock  of  a  corporation  and 
the  shares  of  stock  of  the  shareholders,  and  the  taxation 
of  one  is  not  the  taxation  of  the  other.  So,  where  the 
charter  required  a  banking  corporation  to  pay  to  the  State 
a  certain  annual  tax  on  each  share  of  capital  stock,  which 
should  be  in  lieu  of  all  other  taxes,  it  was  held  that  while 
this  limited  the  amount  of  tax  on  each  share  of  stock  in 
the  hands  of  the  shareholders,  it  did  not  apply  to  nor  cover 
the  case  of  the  capital  stock  of  the  corporation  or  its  sur- 
plus or  accumulated  profits.  On  the  contrary  such  capital 
stock,  surplus  and  accumulated  profits  were  liable  to  be 
taxed  to  the  corporation  as  the  State  might  determine. 

It  was  claimed  that  a  different  ruling  had  been  made  in 
the  case  of  Gordgn  v.  Appeals  Tax  Court,  supra,  page  47, 

1  Tennessee  v.  Whitworth,  117  U,  S.  136. 

2  Shelby  County  v.  Union  &  Planters'  Bank,  161  U.  S.  149;  Union  & 
Planters'  Bank  v.  Memphis,  49  C.  C.  A.  455. 


§  95  IMPAIRMENT   OF   OBLIGATION    OF   CONTRACTS.  98 

where  it  was  said  with  reference  to  the  taxation  of  the 
bank  and  the  stockholders,  "the  aggregate  could  not  be 
taxed  without  its  having  the  same  effect  upon  the  parts 
that  the  tax  upon  the  parts  would  have  upon  the  whole." 
The  court  said  that  there  was  a  difference  in  the  lano-uao-e 
of  the  charter  in  the  two  cases.  "  Giving  to  the  Gordon 
case  the  full  weight  of  authority  for  the  point  actually 
decided,  it  does  not  hold  that  language,  such  as  we  have  in 
the  case  under  consideration,  operates  to  exempt  both  the 
capital  stock  of  the  corporation  and  the  shares  of  stock  in 
the  hands  of  its  shareholders  from  all  taxation  beyond  that 
mentioned  in  the  charter,  and  we  are  entirely  unwilling  to 
unnecessarily  extend  the  authority  of  that  case  so  as  to 
cover  the  question  here."i 

The  same  principle  has  been  applied  when  the  capital  of 
the  bank  has  been  exempted  from  taxation,  so  that  this 
exemption  did  not  extend  to  the  property  right  of  the 
shareholders.  2 

§  95.  Capital  stock  and  surplus  of  corporations. 

In  another  case,  the  charter  provided  for  a  tax  of  a  cer- 
tain amount  on  each  share  of  stock,  which  should  be  in 
lieu  of  all  other  taxes,  and  the  court  held^  that  this  only 
limited  the  amount  of  tax  on  each  share  of  stock  in  the 
hands  of  the  shareholders,  and  did  not  prevent  the  taxa- 
tion of  the  surplus  of  the  corporation.  It  said,  at  page 
146:  "  The  capital  stock  of  a  corporation  and  the  shares 
into  which  such  stock  may  be  divided  and  held  by  in- 
dividual shareholders  are  two  distinct  pieces  of  property. 
The  capital  stock  and  the  shares  of  stock  in  the  hands  of 

1  Mr.  Justice  White  dissenting. 

2  New  Oileans  v.  Citizens'  Bank,  167  U.  S.  371;  Tennessee  v.  Whit- 
worth,  22  Fed.  Rep.  75. 

8  Banlj  of  Commerce  v.  Tennessee,  VGl  U.  S.  134. 


94  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.        §    96 

the  shareholders  may  both  be  taxed,  and  it  is  not  double 
taxation."  It  was  claimed  in  this  case  that  the  surplus  of 
the  corporation  was  exempt  from  taxation.  But  the  court 
said  that  the  surplus  is  corporate  property,  and  is  distinct 
from  the  capital  stock  in  the  hands  of  the  corporation. 
The  exemption  was  not  greater  in  its  scope  than  the  subject 
of  the  tax,  it  said,  and  added,  page  147 :  — 

"  Eecognizing,  as  we  do,  that  there  is  a  different  prop- 
erty in  that  which  is  described  as  capital  stock  from  that 
which  is  described  as  corporate  property  other  than  capital 
stock,  and  remembering  the  necessity  there  is  for  a  clear 
expression  of  the  intention  to  exempt  before  the  exemption 
will  be  granted,  we  must  hold  that  the  surplus  has  not  been 
granted  exemption  by  the  clause  contained  in  the  charter 
under  discussion.  The  very  name  of  surplus  implies  a 
difference.  There  is  capital  stock  and  there  is  a  surplus 
over,  above  and  beyond  the  capital  stock,  which  surplus  is 
the  property  of  the  bank  until  it  is  divided  among  stock- 
holders."! 


§  96.  Special  assessments. 

The  State  of  Arkansas  in  order  to  encourage  the  reclama- 
tion of  swamp  and  overflowed  lands,  provided  that  they 
should  be  exempt  from  taxation  for  the  term  of  ten  years, 
or  until  they  should  be  reclaimed,  and  issued  transferable 
scrip  receivable  in  payment  for  them.  Subsequently  they 
were  subjected  to  both  general  and  special  taxes.  The  Su- 
preme Court  held  that  the  exemption  was  valid  as  to  both 
forms  of  taxation,  and  that  the  repeal  impaired  a  contract 
made  with  the  holders  of  the  scrip  issued  by  the  State.  It 
said  that  the  law  itself  contemplated  the  building  of  levees 

1  As  to  enforcing  the  fiction  of  the  distinct  property-rights  of  the 
corporation  and  shareholders  in  respect  to  the  taxation  of  Federal 
securities,  see  supra,  §  19. 


§   96  IMPAIRMENT    OF    OBLIGATION    OF    CONTRACTS.  95 

and  drains,  and  the  exemption  was  intended  to  be  an  exemp- 
tion from  taxation  therefor. ^  But  it  was  held  in  a  later 
case  2  that  this  case  was  decided  on  its  special  facts,  because 
special  taxes  were  in  contemplation  of  the  parties  in  making 
the  contract  of  exemption,  and  that  it  was  competent  for 
the  State  to  exempt  any  particular  property  from  the 
burden  of  either  kind  of  taxation.  But  an  exemption  from 
taxation  as  a  rule  relates  only  to  the  burden  of  ordinary 
taxes,  and  does  not  include  the  cost  of  local  improvements. 

1  McGee  v.  Mathis,  4  "Wallace,  143. 

2  111.  Central  R.  Co.  v.  Decatur,  147  U.  S.  204. 


CHAPTEK    III. 

REGULATION  OF  COMMERCE. 

§    97,  Express  restraint  upon  taxing  power  of  State. 

98.  Necessity  for  national  control  over  commerce. 

99.  Mr.  Madison  on  necessity  of  national  control  of  commerce. 

100.  National  control  of  commerce,  the  comprehensive  limitation. 

101.  Gibbons  ?7.  Ogden. 

102.  Brown  v.  Maryland. 

103.  Original  package  rule. 

104.  License  tax  on  importer  also  void  as  regulation  of  commerce. 

105.  Regulation  of  commerce  during  non-action  of  Congress. 

106.  Freedom  of  interstate  commerce. 

107.  Consent  of  Congress  to  State  regulation. 

108.  Judicial  construction  of  "arrival"  in  State. 

109.  Duties  on  imports  relate  only  to  foreign  imports. 

110.  "Woodruff  u.  Parham. 

111.  Importations  from  other  States  taxable  in  original  packages. 

112.  Tax  must  be  without  discrimination. 

113.  Taxability  of  goods  from   other  States  not  affected  by  Leisy  v. 

Hardin. 

114.  Original  packages  in  interstate    commerce    as    to    State    police 

authority. 

115.  What  is  an  original  package? 

116.  Theory  of  exemption  of  original  packages  from  State  laws. 

117.  Exemption  only  extends  to  importer. 

118.  Form  of  tax  is  immaterial. 

119.  Intent  to  export  is  insufficient  to  exempt  from  taxation. 

120.  Property  in  commercial  transit. 

121.  Coe  V.  Errol. 

122.  Same  ru  e  in  interstate  as  in  foreign  shipments. 

123.  Taxation  of  floating  logs  and  droves  of  sheep. 

124.  Termination  of  commercial  transit. 

125.  Inheritance  tax  on  aliens  not  tax  on  exports. 

126.  License  tax  on  foreign-exchange  broker  not  tax  on  exports. 

127.  State  taxing  power  in  relation  to  imports  and  exports. 

128.  State  tax  on  alien  passengers  is  void. 

129.  State  inspection  laws  and  interstate  commerce. 

"The  Congress  shall  have   power    *    *     *     to  regulate  commerce 
with  foreign  nations  and  among  th^  several  States  and  with  the  Indian 
tribes."    Const.  U.  S.,  Art.  I,  Sec.  8,  Par,  3. 
(96) 


§  98       STATE   TAXATION   AND    IMPORTS   AND   EXPORTS.  97 

"  No  State  shall,  without  the  conseat  of  Congress,  lay  any  imposts  or 
duties  on  imports  or  exports,  except  what  may  be  absolutely  necessary 
for  executing  its  inspection  laws;  and  the  net  produce  of  all  duties  and 
imposts  laid  by  any  State  on  imports  or  exports  shall  be  for  the  use  of 
the  treasury  of  the  United  States;  and  all  such  laws  shall  be  subject  to 
the  revision  and  control  of  the  Congress."  Const.  U.  S.,  Art.  I,  Sec.  10, 
Par.  2. 

§  97.  Express  restraint  upon  taxing  power  of  State. 

The  strong  feeling  of  jealousy  against  the  national  power 
which  confronted  the  fnimers  of  the  Constitution  is  illus- 
trated in  the  fact  that  the  only  specific  restraint  upon  the 
taxing  power  of  the  States,  that  against  imposts  or  duties 
on  imports  and  exports,  is  qualified  by  the  provision  that 
such  imposts  or  duties  may  be  laid  with  the  consent  of  Con- 
gress and  for  the  benefit  of  the  national  treasury.  This 
qualified  right  to  the  States  of  levying  duties  and  imposts 
may  have  been  adopted  as  one  of  the  compromises  of  the 
Constitution  in  overcoming  the  strong  objection  made  by  the 
States  to  the  power  of  internal  taxation  given  to  Cono-ress. 
But  whatever  the  purpose,  it  has  proven  wholly  superflu- 
ous, as  no  such  duties  and  imposts  have  been  laid  since  the 
foundation  of  the  government.  In  view  of  the  tremen- 
dous development  of  national  commerce,  it  seems  unlikely 
that  this  power  will  ever  be  exercised. 

§  98.  Necessity  for  national  control  over  commerce. 

The  necessity  for  national  control  over  commerce,  both 
interstate  and  foreign,  was  the  immediate  occasion,  and 
indeed    the  moving  purpose,  in  the  adoption  of  the  Consti- 
tution of  the  United  States.     In  the  words  of  Chief  Justice 
Marshall:  ^  — 

"  From  the  vast  inequality  between  the  different  States 
of   the  confederacy     as   to    commercial   advantages,    few 

1  Brown  v.  Maryland,  12  Wheat.  420,  1.  c.  438. 


98  STATE    TAXATION    AXD    IMPOETS    AND    EXPORTS.       §    98 

subjects  were  viewed  with  deeper  interest,  or  excited  more 
irritation,  than  the  manner  in  which  the  several  States  exer- 
cised, or  seemed  disposed  to  exercise,  the  power  of  laying 
duties  on  imports.  From  motives  which  were  deemed  suffi- 
cient by  the  statesmen  of  that  day,  the  general  power  of 
taxation,  indispensably  necessary  as  itAvas,  and  jealous  as  the 
States  were  of  any  encroachment  on  it,  was  so  far  abridged 
as  to  forbid  them  to  touch  imports  or  exports,  with  the 
single  exception  which  has  been  noticed.  Why  are 
they  restrained  from  imposing  these  duties?  Plainlj^  be- 
cause, in  the  general  opinion,  the  interest  of  all  would  be 
best  promoted  by  placing  that  whole  subject  under  the  con- 
trol of  Congress." 

In  Cook  V.  Pennsylvania,!  Justice  Miller  in  the  opinion 
of  the  Court  says:  — 

•"  A  careful  reader  of  the  history  of  the  times  which  im- 
mediately preceded  the  assembling  of  the  convention  that 
framed  the  American  Constitution  cannot  fail  to  discover 
that  the  need  of  some  equitable  and  just  regulation  of  com- 
merce was  among  the  most  influential  causes  which  led  to 
its  meeting.  States  having  fine  harbors  imposed  unlimited 
tax  on  all  goods  reaching  the  continent  through  their  ports. 
The  ports  of  Boston  and  New  York  were  far  behind  New- 
port, in  the  State  of  Rhode  Island,  in  the  value  of  their 
imports ;  and  that  small  State  was  paying  all  the  expenses 
of  her  government  by  the  duties  levied  on  the  goods  landed 
at  her  principal  port.  And  so  reluctant  was  she  to  give  up 
this  advantage,  that  she  refused  for  nearly  three  years  after 
the  other  twelve  original  States  had  ratified  the  Constitution 
to  give  it  her  assent. 

"  In  granting  to  Congress  the  right  to  regulate  commerce 
with  foreign  nations,  and  among  the  several  States,  and  with 
the  Indian  tribes,  and  in  forbidding  the  States  without  the 

»  97  U.  S.  666,1.  c.  p.  574. 


§   99       STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.  99 

consent  of  that  body  to  levy  any  tax  on  imports,  the  framers 
of  the  Constitution  believed  that  tliey  had  sufficiently 
guarded  against  the  dangers  of  any  taxation  by  the  States 
which  would  interfere  with  the  freest  interchange  of  com- 
modities  among  the  people  of  the  different  States,  and  by 
the  people  of  the  States  with  citizens  and  subjects  of 
foreign  governments." 

§  99.  Mr.  Madison  on    necessity  of    national  control  of 
commerce. 

The  necessity  of  giving  the  central  government  the  con- 
trol over  foreign  commerce  seems  to  have  been  conceded, 
even  by  the  opponents  of  the  Constitution.  It  was  pointed 
out  by  Mr.  Madison  in  the  I^ederalist^  that  the  national 
control  over  interstate  commerce  was  essential  to  make  the 
control  over  foreign  commerce  complete  and  effectual. 
Thus  he  said  (pp.  262-263)  :— 

<'The  defect  of  power  in  the  existing  confederacy  to 
regulate  the  commerce  between  its  several  members,  is  in 
the  number  of  those  which  have  been  clearly  pointed  out 
by  experience.  To  the  proofs  and  remarks  which  former 
papers  have  brought  into  view  on  this  subject,  it  may  be 
added  that  without  this  supplemental  provision,  the  great 
and  essential  power  of  regulating  foreign  commerce  would 
have  been  incomplete  and  ineffectual.  A  very  material 
object  of  this  power  was  the  relief  of  the  States,  which 
import  and  export  through  other  States,  from  the  improper 
contributions  levied  on  them  by  the  latter.  Were  these  at 
liberty  to  regulate  the  trade  between  State  and  State,  it 
must  be  foreseen  that  ways  would  be  found  out  to  load  the 
articles  of  import  and  export,  during  the  passage  through 
their  jurisdiction,  with  duties  which  would  fall  on  the 
makers  of  the  latter  and  the  consumers  of  the  former.     We 

1  Federalist,  No.  42 


100         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.     §    100 

may  be  assured  by  past  experience,  that  such  a  practice 
would  be  introduced  by  future  contrivances ;  and  both  by 
that  and  a  common  knowledge  of  human  affairs,  that  it 
would  nourish  unceasing  animosities,  and  not  improb- 
ably terminate  in  serious  interruptions  of  the  public  tran- 
quillity. To  those  who  do  not  view  the  question  through 
the  medium  of  passion  or  of  interest,  the  desire  of  the  com- 
mercial States  to  collect,  in  any  form,  an  indirect  revenue 
from  their  uncommercial  neighbors,  must  appear  not  less 
impolitic  than  itis  unfair ;  since  it  would  stimulate  the  injured 
party,  by'  resentment  as  well  as  interest,  to  resort  to 
less  convenient  channels  for  their  foreign  trade.  But  the 
mild  voice  of  reason,  pleading  the  cause  of  an  enlarged  and 
permanent  interest,  is  but  too  often  drowned,  before  public 
bodies  as  well  as  individuals,  by  the  clamors  of  an  impa- 
tient avidity  for  immediate  and  immoderate  gain." 

§  100.  National  control  of  commerce,  the  compreliensive 
limitation. 

Although  the  regulation  of  commerce  was  thus  the  great 
moving  cause  for  the  adoption  of  the  Constitution,  and  was 
thoroughly  discussed  in  the  proceedings  of  the  convention 
and  in  the  Fedei^alisi,  we  find  in  neither  any  reference  to 
any  possible  interference  with  the  taxing  power  of  the 
States  growing  out  of  such  regulation.  The  far-reaching 
importance  of  national  control  over  interstate  and  foreign 
commerce  was  not,  and  could  not  be,  foreseen.  If  there 
had  been  no  provision  in  the  Federal  Constitution  specifi- 
cally restraining  the  States  from  levying  duties  or  imposts 
on  imports  and  exports,  such  limitation  would  have  been 
implied,  and  would  jiecessarily  have  grown  out  of  the 
exclusive  power  given  to  Congress  to  regulate  such  com- 
merce. This  is  clearly  shown  by  the  reasoning  in  Mc- 
Culloch  V.  Maryland  and  Brown  v.  Maryland.  In  like 
manner,  the  power  to  levy  duties  upon  foreign  commerce 


§     101    STATE    TAXATION    AND    IMPOETS    AND    EXPORTS.         101 

would  possibly  be  held  iucluded  in  the  grant  to  Congress 
of  exclusive  jurisdiction  over  such  commerce. 

The  important  and  comprehensive  limitation  upon  the 
taxing  power  of  the  States*  therefore  is  that  which  is 
implied  from  and  grows  out  of  the  control  given  by  the 
Constitution  to  Congress  over  interstate  and  f  oreio-n  com- 
merce. As  to  the  latter,  we  have  the  express  prohibition 
against  levying  duties  on  imports  or  exports,  and  also 
the  implied  limitation  growing  out  of  the  national  control 
over  foreign  commerce.  Commerce  with  foreign  nations 
includes  importing  and  exporting,  and  a  State  tax  on 
imports  or  exports  is  necessarily  an  interference  with 
foreign  commerce.  Thus,  the  great  leading  case  of  Brown 
'  V.  Maryland,  infra,  is  decided  upon  both  of  these  grounds. 

§  101.   Gibbons  v.  Ogden. 

The  relation  of  the  commerce  clause  of  the  Constitution 
to  the  taxing  power  of  the  State  cannot  be  understood 
without  a  clear  apprehension  of  the  judicial  construction  of 
that  clause,  and  this  begins  with  the  great  opinion  of  Chief 
Justice  Marshall  in  Gibbons  v.  Ogden.^  In  this  opinion, 
as  in  that  of  McCulloch  v.  Maryland,  he  cites  no  authori- 
ties, for  there  were  none  to  cite.  The  grant  by  the  State 
of  New  York  of  the  exclusive  right  to  navigate  the  waters 
of  that  State  with  boats  propelled  by  fire  or  steam  was  held 
void,  on  the  ground  that  it  was  against  the  coasting  license 
granted  by  Congress,  and  was  an  interference  with  com- 
merce between  the  States. 

The  opinion  gave  a  broad  and  comprehensive  construc- 
tion of  the  term  "  commerce,"  which  has  been  the  basis  of 
all  subsequent  adjudications.  The  Constitution  is  one  of 
enumeration,  and  not  of  definition.  The  power  to  regulate 
is  the  power  to  prescribe  the  rules  by  which  commerce  is  to 

»  9  Wheaton,  1. 


102         STATE    TAXATION    AXD    IMPORTS    AND    EXPORTS.    §    101 

be  governed,  and  this  power,  like  all  others  vested  in  Con- 
gress, is  complete  in  itself,  may  be  exercised  to  its  utmost 
extent,  and  acknowledges  no  limitations  other  than  are  pre- 
scribed in  the  Constitution.  As  to  the  extent  of  the  power 
of  Congress,  it  was  said,  1.  c.  page  195  :  — 

"  But,  in  regulating  commerce  with  foreign  nations,  the 
power  of  Congress  does  not  stop  at  the  jurisdictional  lines 
of  the  several  States.  It  would  be  a  very  useless  power  if 
it  could  not  pass  those  lines.  The  commerce  of  the  United 
States  with  foreign  nations  is  that  of  the  whole  United 
States.  Every  district  has  a  right  to  participate  in  it.  The 
deep  streams  which  penetrate  our  country  in  every  direction, 
pass  through  the  interior  of  almost  every  State  in  the 
Union,  and  furnish  the  means  of  exercising  this  right.  If 
Congress  has  the  power  to  regulate  it,  that  power  must  be 
exercised  whenever  the  subject  exists.  If  it  exists  within 
the  States,  if  a  foreign  voyage  may  commence  or  terminate 
at  a  port  within  a  State,  then  the  power  of  Congress  may 
be  exercised  within  a  State." 

The  argument  was  advanced  that  there  was  a  concurrent 
power  of  regulating  commerce  in  the  States,  as  there  was  a 
concurrent  power  over  internal  taxation  vested  in  the 
States  and  the  Federal  government,  and  on  this  point  it 
was  said,  pp.  198,199:— 

"  The  grant  of  the  power  to  lay  and  collect  taxes  is, 
like  the  power  to  regulate  commerce,  made  in  general 
terms,  and  has  never  been  understood  to  interfere  with  the 
exercise  of  the  same  power  by  the  States;  and  hence  has 
been  drawn  an  argument  which  has  been  applied  to  the 
question  under  consideration.  But  the  two  grants  are  not, 
it  is  conceived,  similar  in  their  terms  or  their  nature. 
Although  many  of  the  powers  formerly  exercised  by  the 
States,  are  transferred  to  the  government  of  the  Union, 
yet  the  State  governments  remain,  and  constitute  a  most 
important  part  of  our  system.     The  power  of  taxation  is 


§101    STATE   TAXATION   AND    IMPORTS   AND    EXPORTS.         103 

indispensable  to  their  existence,  and  is  a  power  which,  in 
its  own  nature,  is  capable  of  residing  in,  and  being  exer- 
cised by,  different  authorities  at  the  same  time.  We  are 
accustomed  to  see  it  placed,  for  different  purposes,  in 
different  hands.  Taxation  is  the  simple  operation  of  tak- 
ing small  portions  from  a  perpetually  accumulating  mass, 
susceptible  of  almost  infinite  division;  and  a  power  in  one 
to  take  what  is  necessary  for  certain  purposes,  is  not,  in 
its  nature,  incompatible  with  a  power  in  another  to  take 
what  is  necessary  for  other  purposes.  Congress  is  author- 
ized to  lay  and  collect  taxes,  etc.,  to  pay  the  debts,  and 
provide  for  the  common  defense  and  general  welfare  of  the 
United  States.  This  does  not  interfere  with  the  power  of 
the  States  to  tax  for  the  support  of  their  own  governments ; 
nor  is  the  exercise  of  that  power  by  the  States  an  exercise 
of  any  portion  of  the  power  that  is  granted  to  the  United 
States.  In  imposing  taxes  for  State  purposes,  they  are 
not  doing  what  Congress  is  empowered  to  do.  Congress  is 
not  empowered  to  tax  for  those  purposes  which  are  within 
the  exclusive  province  of  the  States.  When,  then,  each 
government  exercises  the  power  of  taxation,  neither  is 
exercising  the  power  of  the  other.  But,  when  a  State  pro- 
ceeds to  regulate  commerce  with  foreign  nations,  or  among 
the  several  States,  it  is  exercising  the  very  power  that  is 
granted  to  Congress,  and  is  doing  the  very  thing  which 
Congress  is  authorized  to  do.  There  is  no  analogy,  then, 
between  the  power  of  taxation  and  the  power  of  regulating 
commerce." 

The  court  said  therefore  that  in  any  case  of  conflict,  the 
Act  of  Congress  is  supreme,  and  the  law  of  the  State, 
though  enacted  in  the  exercise  of  powers  not  controverted, 
mu.st  yield  to  it. 

It  was  conceded  that  commerce  between  the  several 
States  is  restricted  to  that  which  concerns  more  States  than 
one,  and  that  completely  internal  commerce  of  the  State 


104         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.       §102 

may   be    considered    as  reserved  to  the  regulation  of  the 
State  itself. 

§  102.  Brown  v.  Maryland. 

The  first  application  of  these  clauses  of  the  Constitution 
to  the  taxing  power  of  the  State  was  in  1837  in  the  case  of 
Brown  v.  Marj^land,  wherein  another  great  opinion  of 
Chief  Justice  Marshall  declared  the  line  of  limitation 
between  the  exercise  of  State  and  Federal  authority.  In 
McCuUoch  V.  Maryland,  the  exemption  from  State  taxa- 
tion of  the  means  employed  by  the  general  government 
had  been  declared ;  and  in  this  case  the  same  principle  of 
Federal  supremacy  was  extended  to  justify  the  limitation 
of  a  State's  taxing  authority  by  the  national  control  over 
commerce. 

The  State  of  Maryland  passed  an  act  requiring  every  im- 
porter of  foreign  merchandise  to  take  out  a  license,  paying 
therefor  fifty  dollars.  Conviction  under  the  act  was  sus- 
tained by  the  Court  of  Appeals  of  Maryland,  but  it  was  de- 
clared unconstitutional  by  the  Supreme  Court,  and  the 
requirement  of  a  license  for  conducting  the  business  of  an 
importer  was  held  to  come  within  the  prohibition  of  a  tax 
on  imports,  and  to  be  also  an  attempted  regulation  of  com- 
merce.^  As  to  the  limitation  of  the  State's  taxing  power 
by  the  paramount  control  of  Congress  over  commerce,  see 
supra,  §  9.  Commenting  upon  the  circumstances  attending 
the  adoption  of  the  Constitution,  the  court  said,  1.  c. 
page  438  :  - — 

"  From  the  vast  inequality  between  the  different  States 
of  the  confederacy,  as  to  commercial  advantages,  few 
subjects  were  viewed  with  deeper  interest,  or  excited  more 
irritation,  than  the  manner  in  which  the  several  States  exer- 

1  12  Wheat.  419,  The  case  was  argued  for  Maryland  by  Mr.  Tacey, 
afterwards  the  successor  of  Chief  Justice  Marshall,  and  by  Reverdy  John- 


§    102    STATE    TAXATION    AXD    IMPORTS    AND    EXPORTS.         105 

cised,  or  seemed  disposed  to  exercise,  the  power  of  la  vino- 
duties  on  imports."     *     *     « 

In  repl}^  to  the  argument  that  the  abuse  of  power  was  not 
to  be  apprehended,  it  was  said,  l-.  c.  page  439: 

"Questions  of  power  do  not  depend  on  the  degree  to 
which  it  may  be  exercised.  K  it  may  be  exercised  at  all,  it 
must  be  exercised  at  the  will  of  those  in  whose  hands  it  is 
placed.  K  the  tax  may  be  levied  in  this  form  by  a  State,  it 
may  be  levied  to  an  extent  which  will  defeat  the  revenue  by 
impost,  so  far  as  it  is  drawn  from  importations  into  the 
particular  State."     *     *     * 

It  was  urged  that  the  tax  was  not  upon  the  import  but 
upon  the  importer,  not  upon  the  article  but  upon  the  per- 
son, and  on  this  point  the  opinion  proceeded,  page  444:  — 

"It  is  impossible  to  conceal  from  ourselves  that  this  is 
varying  the  form,  without  varying  the  substance.  It  is 
treating  a  prohibition  which  is  general,  as  if  it  were  confined 
to  a  particular  mode  of  doing  the  forbidden  thing.  All 
must  perceive  that  a  tax  on  the  sale  of  an  article,  imported 
only  for  sale,  is  a  tax  on  the  article  itself.  It  is  true,  the 
State  may  tax  occupations  generally,  but  this  tax  must  be 
paid  by  those  who  employ  the  individual,  or  is  a  tax  on  his 
business.  The  lawyer,  the  ph3^sician,  or  the  mechanic, 
must  either  charge  more  on  the  article  in  which  he  deals, 
or  the  thing  itself  is  taxed  through  his  person.  This  the 
State  has  a  right  to  do,  because  no  constitutional  prohibi- 
tion extends  to  it.  So,  a  tax  on  the  occupation  of  an  im- 
porter is,  in  like  manner,  a  tax  on  importation.  It  must  add 
to  the  price  of  the  article,  and  be  paid  by  the  consumer,  or 
by  the  importer  himself,  in  like  manner  as  a  direct  duty  on 
the  article  itself  would  be  made.  This  the  State  has  not 
a  right  to  do,  because  it  is  prohibited  by  the  Constitution." 

It  was  also  urged  that  just  as  export  means  only  to  take 
goods  out  of  the  countr}'^,  so  to  import  means  only  to  bring 
goods  in.     As  to  this,  the  court  said  that  the  United  States 


106         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.     §    103 

has  the  same  right  to  tax  occupations  that  is  possessed  by 
the  States,  but  Congress  cannot  escape  tiie  prohibition 
against  taxing  exports  by  sajnng  that  a  tax  on  the  exporter 
is  on  the  person  and  not  on  the  article  and  that  it  has  a 
right  to, tax  occupations.  A  revenue  cutter  might  be  sta- 
tioned off  the  coast  for  the  purpose  of  levying  a  duty  on  all 
merchandise  found  on  vessels  which  were  leaving  the  United 
States  for  foreign  ports,  but,  said  the  court,  at  page 
445,  "  would  it  be  received  as  an  excuse  for  this  outrage, 
were  the  government  to  say  that  exportation  meant  no 
more  than  carrying  goods  out  of  the  country,  and  as  the 
prohibition  to  lay  a  tax  on  imports,  or  things  imported, 
ceased  the  instant  they  were  brought  into  the  country,  so 
the  prohibition  to  tax  articles  exported  ceased  when  they 
were  carried  out  of  the  country?  "  ^ 

The  right  to  import  therefore  includes  the  right  to  sell, 
and  a  license  upon  the  business  of  an  importer  is  a  tax  upon 
the  right  to  sell,  and  therefore  upon  the  right  to  import. 

§  103.  Original  package  rule. 

The  court  admitted  the  difficulty  of  setting  a  definite 
time  when  the  taxing  power  of  the  State  should  begin,  but 
fixed  it  as  beginning  when  the  original  package  in  which 
the  goods  have  been  imported  is  broken  up  or  sold,  and 
thus  was  laid  down  the  "  original  package  rule  "  which  has 
been  the  subject  of  so  much  judicial  discussion.  On  this 
point  the  court  said,  at  page  441 ;  — 

"  The  constitutional  prohibition  on  the  States  to  lay  a 
duty  on  imports,  a  prohibition  which  a  vast  majority  of 
them  must  feel  an  interest  in  preserving,  may  certainly  come 
in  conflict  with  their  acknowledged  power   to  tax  persons 

1  As  to  this  illustration,  see  dissenting  opinion  of  Chief  Justice 
Fuller  in  Dooley  v.  United  States,  183  U.  S.  174,  where  it  is  applied  to 
the  tariff  tax  under  the  Foraker  act  on  goods  coming  into  Porto  Rico 
from  the  United  States. 


§    103    STATE    TAXATION   AND    IMPORTS    AND    EXPORTS.         107 

and  property  within  their  territory.  The  power,  and  the 
restriction  on  it,  though  quite  distinguishable  when  they  do 
not  approach  each  other,  may  yet,  like  the  intervening  colors 
between  white  and  black,  approach  so  nearly  as  to  perplex 
the  understanding,  as  colors  perplex  the  vision  in  mark- 
ing the  distinction  between  them.  Yet  the  distinction 
exists,  and  must  be  marked  as  the  cases  arise.  Till  they 
do  arise,  it  might  be  premature  to  state  any  rule  as  being 
universal  in  its  application.  It  is  sufficient  for  the  pres- 
ent to  say,  generally,  that  when  the  importer  has  so  acted 
upon  the  thing  iuiported,  that  it  has  become  incorporated 
and  mixed  up  with  the  mass  of  property  in  the  countiy,  it 
has,  perhaps,  lost  its  distinctive  character  as  an  import, 
and  has  become  subject  to  the  taxing  power  of  the  State ; 
but  while  remaining  the  property  of  the  importer,  in  his 
warehouse,  in  the  original  form  or  package  in  which  it  was 
imported,  a  tax  upon  it  is  too  plainl}^  a  duty  on  imports  to 
escape  the  prohibition  in  the  Constitution."  ^ 

1  Chief  Justice  Taney,  the  successor  of  Chief  Justice  Marshall,  who 
appeared  in  this  case  as  counsel  for  the  State  of  Maryland,  in  his 
opinion  in  the  License  Cases,  5  Howard,  504,  said  at  page  575;  concern- 
ing this  "  original  package  "  rule :  — 

•*  I  argued  the  case  in  behalf  of  the  State,  and  endeavored  to  main- 
tain that  the  law  of  Maryland,  which  required  the  importer  as  well  as 
other  dealers  to  take  out  a  license  before  he  could  sell,  and  for  which 
he  was  to  pay  a  certain  sura  to  the  State,  was  valid  and  constitutional; 
and  certainly  I  at  that  time  persuaded  myself  that  I  was  right,  and 
thought  the  decision  of  the  court  restricted  the  powers  of  the  State 
more  than  a  sound  construction  of  the  Constitution  of  the  United 
States  would  warrant.  But  further  and  more  mature  reflection  has 
convinced  me  that  the  rule  laid  down  by  the  Supreme  Court  is  a  just 
and  safe  one,  and  perhaps  the  best  that  could  have  been  adopted  for 
preserving  the  right  of  the  United  States  on  the  one  hand,  and  of  the 
States  on  the  other,  and  preventing  collision  between  them.  The  ques- 
tion, I  have  already  said,  was  a  very  difficult  one  for  the  judicial 
mind.  In  the  nature  of  things,  the  line  of  division  is  in  some  degree 
vague  and  indefiuite,  and  I  do  not  see  how  it  could  be  drawn  more 
accurately  and  correctly,  or  more  in  harmony  with  the  obvious  inten- 
tion and  object  of  the  provisions  in  the  Constitution." 


108        STATE   TAXATION   AND   IMPORTS    AND   EXPORTS.    §    104 

§  104.  tiicense  tax   on  importer  also  void  as  regulation 
of  commerce. 

The  court  held  further  that  the  act  imposing  a  license 
was  also  void  as  an  attempted  regulation  of  commerce. 
Any  charge  on  the  introduction  of  the  article  into  the 
country,  and  its  incorporation  with  the  mass  of  the  prop- 
erty therein,  must  be  hostile  to  the  power  of  Congress, 
since  an  essential  part  of  its  regulation  and  the  principal 
object  of  it  is  to  prescribe  the  regular  means  for  accom- 
plishing that  introduction  and  incorporation.  This  could 
not  abridge  the  acknowledged  power  of  a  State  to  tax  its 
own  citizens,  because  that  power  is  subject  to  the  para- 
mount authority  of  Congress.  On  the  historical  setting 
of  the  commerce  clause  and  the  occasion  of  its  adoption, 
it  was  said,  1.  c.  p.  445 :  — 

"  The  oppressed  and  degraded  state  of  commerce  previ- 
ous to  the  adoption  of  the  Constitution  can  scarcely  be  for- 
gotten. It  was  regulated  by  foreign  nations  with  a  single 
view  to  their  own  interests ;  and  our  disunited  efforts  to 
counteract  their  restrictions  were  rendered  impotent  by 
want  of  combination.  Congress  indeed  possessed  the 
power  of  making  treaties ;  but  the  inability  of  the  federal 
government  to  enforce  them  had  become  so  apparent  as 
to  render  that  power  in  a  great  degree  useless.  Those  who 
felt  the  injury  arising  from  this  state  of  things,  and  those 
who  were  capable  of  estimating  the  influence  of  commerce 
on  the  prosperity  of  nations,  perceived  the  necessity  of 
giving  the  control  over  this  important  subject  to  a  single 
government.  It  may  be  doubted  whether  any  of  the  evils 
proceeding  from  the  feebleness  of  the  federal  government 
contributed  more  to  that  great  revolution  which  introduced 
the  present  system,  than  the  deep  and  general  conviction 
that  commerce  ought  to  be  regulated  by  Congress.  It  is 
not  therefore  matter  of  surprise,  that  the  grant  should 
be  as  extensive  as  the  mischief,  and  should  comprehend  all 


§    105    STATE    TAXATION    AND    IMPORTS    AND    EXPORTS,         109 

foreign  commerce  and  all  commerce  among  the  States. 
To  construe  the  power  so  as  to  impair  its  efficacy, 
would  tend  to  defeat  an  object,  in  the  attainment  of 
which  the  American  public  took,  and  justly  took,  that 
strong  interest  which  arose  from  a  full  conviction  of  its 
necessity." 

§  105.  Regulation    of    comineree    during    non-action    of 
Congress. 

In  Gibbons  v.  Ogden,  Congress  had  exercised  its  control 
over  interstate  commerce  by  granting  a  coasting  license,  and 
the  decision  of  the  court  therefore  was  really  based  upon 
the  invalidity  of  the  exclusive  grant  by  the  State  of  New  York 
as  against  the  right  granted  by  Congress.  It  was  unneces- 
sary therefore  to  decide  the  extent  of  the  State's  right, 
during  the  non-action  of  Congress,  to  exercise  its  police  or 
taxing  power,  when  such  exercise  might  incidentally  affect 
interstate  commerce.     This  remained  a  vexafa  quaestio.^ 

Thus,  in  the  License  Cases,  decided  in  1847,  where  the 
question  before  the  court  was  as  to  the  validity  of  certain 
prohibitive  or  liquor  license  tax  laws  for  some  of  the  New 
England    States,  Chief  Justice  Taney  said,  at  page  578  :  — 

"The  question,  therefore,  brought  up  for  decision  is, 
whether  a  State  is  prohibited  by  the  Constitution  of  the 
United  States  from  making  any  regulations  of  foreign  com- 
merce or  of  commerce  with  another  State,  although  such 
regulation  is  confined  to  its  own  territory,  and  made  for 
its  own  convenience  or  interest,  and  does  not  come  in  conflict 
with  any  law  of  Congress.  In  other  words,  whether  the 
grant  of  power  to  Congress  is  of  itself  a  prohibition  to  the 
States,  and  renders  all  State  laws  upon  the  subject  null 
and  void." 

All  of  the  judges  concurred  in  holding   the  State  laws 

1  New  York  »,  Miln,  II  Peters,  102;  License  Cases,  5  How.  504; 
Passenger  Cases,  7  How.  283. 


110         STATE    TAXATION    AXD    I31POETS    AND    EXPORTS.    §    106 

valid;  some  however  concurring  on  the  ground  that  the 
license  laws  were  merely  police  regulations,  although  they 
might  incidentally  affect  commerce. 

Later  the  rule  was  laid  down,  that  the  power  to  regulate 
commerce  is  one,  which  includes  many  subjects,  various 
and  quite  unlike  in  their  nature ;  and  that  whenever  these 
subjects  are  in  their  nature  national  or  require  one  uniform 
system  or  plan  of  regulation,  they  may  be  justly  held  to 
belong  to  that  class  over  which  Congress  has  exclusive 
power  of  regulation ;  but  that  local  and  limited  matters, 
not  national  in  their  nature,  as  pilotage  and  the  like,  may 
be  regulated  by  the  States  during  the  non-action  of  Con- 
gress. The  action  of  Congress  however  renders  void  such 
regulations  of  the  States  as  conflict  with  it.^ 

§  106,  Freedom  of  interstate  cominerce. 

Finally,  nearly  fifty  years  after  the  decision  in  Brown  v. 
Maryland,  the  doctrine  of  the  License  Cases  was  definitely 
overruled  by  the  Supreme  Court  and  the  rule  established, 
that  where  the  subject  is  national  in  its  character,  and 
therefore  in  its  nature  requires  uniformity  of  regulation 
affecting  all  the  States,  e.  g.,  interstate  transportation, 
including  the  importation  of  goods  from  one  State  into 
another.  Congress  alone  can  act,  and  its  non-action  means 
that  commerce  must  be  free.  This  ruling  was  made  with 
reference  to  the  importation  of  liquors  into  a  State,  where 
the  sale  of  such  liquors  was  prohibited.^  The  freedom  of 
transportation  there  declared  extends  to  the  goods  in  their 
original  packages.  Thus  the  "  original  package  ",  as  first 
introduced  in  Brown  v.  Maryland  in  reference  to  foreign 
importations,  becomes  material  in  interstate  commerce  in 

1  Cooley  V.  Board  of  Wardens  of  Philadelphia,  12  Howard,  299. 

2  Bowman  v.  Railway  Co.,  125  U.  S.  508;  Leisy  ^?.  Hardin,  135  U.  S. 
100,  p.  119  and  cases  cited. 


§107    STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.  Ill 

limiting  the  police  power  of  the  State.     In  Leisy  v.  Ilardin 
the  rule  is  thus  formulated  by  the  court :  — 

"  The  absence  of  any  law  of  Congress  on  the  subject  is 
equivalent  to  its  declaration  that  commerce  in  that  matter 
shall  be  free.  Thus  the  absence  of  regulations  as  to  inter- 
state commerce  with  reference  to  any  particular  subject  is 
taken  as  a  declaration,  that  the  importation  of  that  article 
into  the  States  shall  be  unrestricted.  It  is  only  after  the 
importation  is  completed,  and  the  property  imported  has 
mingled  with  and  become  a  part  of  the  general  property  of 
the  State,  that  its  regulations  can  act  upon  it,  except  so  far 
as  may  be  necessary  to  insure  safety  in  the  disposition  of 
the  import  until  thus  mingled." 

§  107.  Consent  of  Congress  to  State  regulation. 

After  the  decision  in  Leisy  v.  Hardin,  Congress  enacted  a 
statute  known  as  the  Wilson  bill,  providing  that  liquors 
transported  into  any  State  or  Territory,  or  remaining 
therein  for  use,  consumption,  sale  or  storage,  shall,  upon 
arrival  in  such  State  or  Territory,  be  subject  to  the  opera- 
tion and  effect  of  its  laws,  enacted  in  the  exercise  of  its 
police  powers,  to  the  same  extent  and  in  the  same  manner 
as  though  such  liquors  had  been  there  produced,  "and 
shall  not  be  exempt  therefrom  by  reason  of  being  intro- 
duced therein  in  the  original  packages  or  otherwise.^  It 
was  claimed  that  the  act  was  invalid,  because  the  Constitu- 
tion guarantees  freedom  of  commerce  among  the  States  in 
all  things,  and  therefore  Congress  could  not  delegate  its 
control  over  interstate  commerce  to  the  States.  But  the 
court  said,  at  page  561,  that  "  in  surrendering  their  own 
power  over  external  commerce,  the  States  did  not  secure 
absolute  freedom  in  such  commerce,  but  only  the  i)rotec- 

1  26  Stats.  313,  c.  728.  This  act  was  approved  August  8,  1890,  and 
was  held  constitutional  by  the  Supreme  Court  in  In  re  Rahrer,  UO  U.  S. 
615. 


112         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.     §    109 

tion  from  encroachment  afforded  b}'  confiding  its  regulation 
exclusively  to  Congress." 

§  108.  Judicial  construction  of  "  arrival "  in  State. 

In  a  later  case/  the  court  construed  this  statute  as  not 
applying  to  goods  while  in  transit  in  the  State  before  de- 
livery to  the  consignee.  It  was  claimed  that,  if  the  act 
was  construed  to  apply  to  the  goods  the  moment  they 
reached  the  Iowa  line  and  before  the  consummation  of  the 
contract  of  shipment,  it  would  give  the  statutes  of  Iowa 
extra-territorial  operation  and  would  render  the  Act  of 
Congress  repugnant  to  the  Constitution.  But  the  court 
said  that  its  construction  of  the  statute,  according  to 
which  "arrival"  meant  the  completion  of  the  shipment 
by  delivery  to  the  consignee,  rendered  it  unnecessary  to 
consider  whether  if  the  act  of  Congress  had  submitted  the 
right  to  make  interstate  commerce  shipments  to  State  con- 
trol, it  would  be  repugnant  to  the  Constitution. 

§  109.  Duties  on  imports  relate  only  to  foreign  imports. 

Chief  Justice  Marshall  said  at  the  conclusion  of  the 
opinion  in- Brown  v.  Maryland :  "It  may  be  proper  to  add, 
that  we  suppose  the  principles  laid  down  in  this  case,  to 
apply  equally  to  importations  from  a  sister  State.  We  do 
not  mean  to  give  any  opinion  on  a  tax  discriminating  be- 
tween foreign  and  domestic  articles."  The  tax  in  this  case, 
it  will  be  remembered,  was  upon  the  business  of  a  foreign 
importer.  In  1860  a  stamp  tax  imposed  by  the  State  of 
California  upon  a  bill  of  lading  for  merchandise  shipped 
from  San  Francisco  to  New  York  was  held  to  be  in  effect  a 
tax  upon  exports,  and  therefore  invalid,  the  words  "  im- 
ports and  exports ' '  in  the  Constitution  being  assumed  to 

1  Rhodes  «.  Iowa,  170  U.  S.  412.  See  infra,  section  125,  for  more 
complete  statement. 


§   110    STATE   TAXATION   AND    IMPORTS    AND    EXPORTS.  113 

include  importations  from    one    State  into  another.     The 
opinion  was  by  Chief  Justice  Taney. ^ 

But  in  1868  a  tax  levied  in  Mobile  upon  all  sales  of  mer- 
chandise was  claimed  to  be  invalid,  because  it  was  laid  on 
the  sale  of  merchandise  brou^^ht  from  other  States  while  it 
remained  in  the  original  packages.  It  was  urged  that  the 
case  was  controlled  by  the  Almy  case,  supra,  where  the  court 
had  adopted  the  remark  in  the  opinion  in  Brown  v.  Maryland, 
supra.  But  the  court  held,  opinion  by  Justice  Miller, ^  that . 
the  words  "  imports  and  exports  "  as  used  in  the  Constitu- 
tion, had  exclusive  reference  to  foreign  trade. 

§  110.  Woodruff  V.  Parhain. 

With  reference  to  the  decision  in  Brown  v.  Maryland,  the 
court  said,  at  page  130:  — 

' '  That  decision  has  been  recognized  for  over  forty  years 
as  governing  the  action  of  this  court  in  the  same  class  of 
cases;  and  its  reasoning  has  been  often  stated  and  received 
with  approbation  in  others  to  which  it  is  applicable.  We  do 
not  now  propose  to  question  its  authority  or  to  depart  from 
its  principles.  The  tax  of  the  State  of  Maryland,  which  was 
the  subject  of  the  controversy  in  that  case,  was  limited  by 
its  terms  to  importers  of  foreign  articles  or  commodities, 
and  the  proposition  that  we  are  now  to  consider  is  whether 
the  provision  of  the  Constitution  to  which  we  have  referred 
extends,  in  its  true  meaning  and  intent,  to  articles  brought 
from  one  State  of  the  Union  into  another." 

The  court  said  further  that  the  actual  remark  of  Chief 
Justice  Marshall  in  the  opinion  at  the  conclusion  of  Brown 
V.  Maryland  could  only  be  received  as  an  intimation  of  what 
the  court  might  have  decided,  if  such  a  case  had  ever  come 
before  it,  and  the  remark  might  have  referred  only  to  the 
matter  of  discriminating  taxes  in  domestic  commerce. 

*  Almy  V.  California,  24  Howard,  169. 
'  Woodruff  w.  Parham,  8  Wallace,  123. 


114         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.     §    111 

The  case  of  Almy  v.  California,  fiupi^a,  was  also  declared 
to  have  involved  an  interference  with  interstate,  not  foreign, 
commerce,  although  it  was  not  so  stated  in  the  opinion. 
The  court  added :  "We  take  it  to  be  a  sound  principle, 
that  no  proposition  of  law  can  be  said  to  be  overruled  by  a 
court,  which  was  not  in  the  mind  of  the  court  when  the 
decision  was  made."  As  to  the  License  Cases, i  the  court 
said  it  was  very  doubtful  if  any  material  proposition  was 
decided,  though  the  precise  question  involved  in  the  case  at 
bar  was  before  the  court  and  seemed  to  require  solution. 
The  words  "  imports  and  exports  "  are  frequently  used  in 
the  Constitution  and  have  a  necessary  correlation,  and  the 
same  words  are  used  with  reference  to  the  taxing  power  of 
Cono-ress.  It  was  obvious  that  if  articles  brouirht  from  one 
State  into  another  were  exempt  from  taxation,  even  under 
the  limited  circumstances  laid  down  in  Brown  v.  Maryland, 
the  grossest  injustice  must  prevail  and  equality  of  the  public 
burden  in  our  large  cities  would  be  impossible.  The  appli- 
cation of  this  original  package  rule  would  iDractically  exempt 
from  all  taxation  the  wholesale  merchants  who  bought  their 
goods  in  original  packages. ^ 

§  111.  Importations  from  other  States  taxable  in  origi- 
nal packages. 

The  original  package  rule  therefore  as  laid  down  in 
Brown  v.  Maryland  does  not  prevent  the  taxation  of  mer- 
chandise brought  into  one  State  from  another,  even  though 
it  remains  in  the  original  packages.  In  this  respect  such 
merchandise  is   sharply  distinguished  from  foreign  goods 

1  5  Howard,  504. 

2  Justice  Nelson  dissented,  claiming  that  the  absence  of  discrimin- 
ation would  be  entirely  worthless  as  a  protection  against  the  taxation 
of  interstate  commerce;  that  the  coal  of  Pennsylvania  could  be  taxed 
in  New  York,  the  salt  and  plaster  of  New  York  in  Pennsylvania,  the 
grain  and  flour  of  the  West  in  Massachusetts,  and  the  lumber  of  Wis- 
consin in  Illinois,  and  so  on. 


§  111  STATE  TAXATION  AND  IMPORTS  AND  EXPORTS.    115 

which  are  exempt  from  taxation  while  in  the  original  pack- 
ages and  in  the  hands  of  the  importer. 

In  later  cases  the  ruling  in  Woodruff  v.  Parham  has 
been  reaffirmed.  The  principle  was  applied  to  shipments 
of  coal  from  Pennsylvania  by  water  to  New  Orleans, 
to  be  sold  in  open  market  there.  It  was  held ^  that,  though 
still  on  the  river  at  New  Orleans,  it  was  intermingled  with 
the  general  property  in  the  State  and  subject  to  taxation, 
although  it  might  be  sold  from  the  vessel,  without  being 
landed,  and  for  the  purpose  of  being  taken  out  of  the 
country  on  a  vessel  bound  for  a  foreign  port.  It  was  sub- 
ject to  the  taxing  power  of  the  State,  because  when  the 
tax  was  levied,  the  coal  was  held  in  New  Orleans  for  sale, 
and  it  was  immaterial  that  thereafter  some  of  it  might  have 
been  sold  for  export.  "  A  duty  on  exports  must  either  be 
a  duty  levied  on  goods  as  a  condition,  or  by  reason  of  their 
exportation,  or,  at  least,  a  direct  tax  or  duty  on  goods 
intended  for  exportation."  ^ 

In  Brown -y.  Houston,  the  court  also  said,  at  pp.  633, 
634:  — 

"When  the  assessor  of  taxes  goes  his  round,  must  he 
omit  from  his  list  of  taxables  all  goods  which  have  come 
into  the  city  from  the  factories  of  New  England  and  New 
Jersey,  or  from  the  pastures  and  grain  fields  of  the  West? 
If  he  must,  what  will  be  left  for  taxation?  And  how  is 
he  to  distinguish  between  those  goods  which  are  taxable 
and  those  which  are  not?  With  the  exception  of  goods 
imported  from  foreign  countries,  still  in  the  original  jiack- 
ages,  and  goods  in  transit  to  some  other  place,  why  may  he 
not  assess  all  property  alike  that  may  be  found  in  the  city, 
being  there    for  the  purpose   of  remaining  there  till  used 

1  Brown  u.  Houston,  114  U.  S.  622;  Pittsburgh,  etc.,  Coal  Co.  u. 
Bates,  156  U.  S.  577. 

2  The  court  added,  p.  629:  '' Whether  the  last  would  be  a  duty  on 
exports  it  is  not  necessary  to  determine." 


116        STATE   TAXATION   AND    IMPORTS   AND   EXPORTS.     §    112 

or  sold,  and  constituting  part  of  the  great  mass  of  its  com- 
mercial capital — provided  always,  tliat  the  assessment  be 
a  general  one,  and  made  without  discrimination  between 
goods  the  product  of  New  York,  and  goods  the  product  of 
other  States?  "     *     *     *  , 

§  112.  Tax  must  be  without  discrimination. 

But  the  tax  must  be  without  discrimination  as  between 
the  domestic  -and  non-domestic  goods.  While  property 
brought  in  from  other  States,  although  remaining  in  the 
original  packages,  can  be  taxed,  it  must  be  taxed  as 
property  in  common  with  other  property  in  the  State,  and 
there  must  be  no  discrimination  against  it.  On  this  point 
the  court  said,  at  page  634,  in  the  case  last  cited ;  — 

"We  do  not  mean  to  say  that  if  a  tax  collector  should 
be  stationed  at  every  ferry  and  railroad  depot  in  the  city  of 
New  York,  charged  with  the  duty  of  collecting  a  tax  on 
every  wagon  load,  or  car  load  of  produce  and  merchandise 
brought  into  the  city,  that  it  would  not  be  a  regulation  of, 
and  restraint  upon  interstate  commerce,  so  far  as  the  tax 
should  be  imposed  on  articles  brought  from  other  States. 
We  think  it  would  be,  and  that  it  would  be  an  encroach- 
ment upon  the  exclusive  powers  of  Congress.  It  would  be 
very  different  from  the  tax  laid  on  auction  sales  of  all 
property  indiscriminately,  as  in  the  case  of  Woochnif  x. 
Parham,  which  had  no  relation  to  the  movement  of  goods 
from  one  State  to  another.  It  would  be  very  different 
from  a  tax  laid,  as  in  the  present  case,  on  property  which 
had  reached  its  destination,  and  had  become  part  of  the 
general  mass  of  property  of  the  citv,  and  which  was  only 
taxed  as  a  part  of  that  general  mass  in  common  with  all 
other  property  in  the  city,  and  in  precisely  the  same 
manner. 

"When  Congress  shall  see  fit  to  make  a  regulation  on 
the  subject   of   property   transported   from    one    State  to 


§   114   STATE   TAXATION   AND    IMPOETS   AND   EXPOETS.         117 

another,  which  may  have  the  effect  to  give  it  a  temporary 
exemption  from  taxation  in  the  State  to  which  it  is  trans- 
ported, it  wiU  be  time  enough  to  consider  any  conflict  that 
may  arise  between  such  reguhition  and  the  general  taxing 
laws  of  the  State." 

§  113.  Taxability  of  goods  from  other  States  not  affected 
by  decision  in  Leisy  v.  Hardin. 

After  the  decision  of  the  Supreme  Court  in  Leisy  v. 
Hardin,  supra,  wherein  the  whole  subject  of  the  power  and 
jurisdiction  of  the  State  over  property  brought  in  from 
other  States  in  the  course  of  interstate  commerce  was 
examined,  and  the  freedom  of  interstate  commerce  in  the 
absence  of  congressional  legislation  asserted,  the  court  was 
urged  to  overrule  Brown  v.  Houston,  on  the  ground  that  it 
had  been  in  effect  overruled  by  Leisy  v.  Hardin  and  other 
later  decisions  of  the  Supreme  Court.  In  this  case  the  coal, 
which  had  been  brought  down  the  river  from  Pittsburgh, 
was  afloat  at  Baton  Eouge  in  the  orio-inal  barges  in  which  it 
had  been  exported  from  Pennsylvania.  The  court  how- 
ever reafiirmed  its  decision.^  It  said  that  as  the  coal  was 
subjected  to  no  discrimination  in  favor  of  the  products  of 
Louisiana,  but  treated  in  exactly  the  same  way,  the  tax  was 
valid.  It  was  not  a  tax  imposed  upon  the  coal  as  a  foreign 
product,  nor  by  reason  of  its  being  brought  to  Louisiana, 
nor  while  it  was  in  a  state  of  transit  throug-h  Louisiana. ^ 

§  114.    Original  package  in  interstate    commerce  as   to 
State  police  authority. 

It  will  be  observed  that  there  is  a  distinction  between  the 
taxing  power  of  the  State  and  its  police  power  with  refer- 

1  Pittsburgh  Coal  Co.  v.  Bates,  156  U.  S.  577. 

2  In  American  Fertilizing  Co.  v.  Board  of  Agriculture  of  Nor.  Car., 
43  Fed.  Rep.  609,  decided  in  1890,  the  opinion  was  expressed  that 
"Woodruff  V.  Parham,  as  well  as  the  License  cases,  may  be  considered 
overruled  by  Leisy  v.  Hardin." 


118         STATE    TAXATION    AND    IMPOKTS   AND    EXPORTS.     §    115 

euce  to  the  original  packages  in  interstate  shipments. 
Under  the  rulings  referred  to,  Leisy  v,  Hardin  and  Bow- 
man V.  Railway  Co.,  supra^  in  the  absence  of  legislation  by 
Congress,  commerce  between  the  States  must  be  free.  The 
State  therefore  in  the  exercise  of  its  police  power  cannot 
exclude  the  products  of  other  States,  even  though  it  may 
conclude  that  they  are  injurious  to  its  people ;  but  when 
these  products  are  admitted  into  the  State,  they  become 
subject  to  its  taxing  power  equally  with  its  own  products. 
Thus,  in  a  recent  case,^  the  act  of  the  State  of  Pennsyl- 
vania prohibiting  the  introduction  of  oleomargarine  from 
another  State  and  its  sale  in  the  original  package  was  held 
void  as  an  interference  with  interstate  commerce.  It  was 
held  that  oleomargarine  is  a  lawful  article  of  commerce, 
and  that,  while  a  State  can  regulate  its  introduction  so 
as  to  insure  purity,  it  cannot  wholly  exclude  it.  The 
right  of  the  importer  to  sell  in  the  original  package  does 
not  depend  upon  whether  such  package  is  suitable  for 
retail  trade  or  not.  The  court  said  however,  at  page  24 : 
"We  do  not  say  or  intimate  that  this  right  of  sale  ex- 
tended beyond  the  first  sale  by  the  importer  after  the 
arrival  of  the   oleomargarine  in  the  State." 

But  in  a  later  case^  the  court  sustained  a  conviction 
under  the  laws  of  Tennessee,  for  the  sale  of  cigarettes 
in  what  were  claimed  to  be  original  packages,  on  the 
ground  that  the  size  of  the  package  was  such  as  to  indi- 
cate, under  the  circumstances,  that  it  was  prepared  for 
the  purpose  of  evading  the  law. 

§  115.  What  is  an  original  package? 

It  is  therefore  necessary  to  determine  what  is  an  "  orig- 
inal package,"  in  regard  both  to  importations  from  abroad 

1  SchoUenberger  v.  Pennsylvania,  171  U.  S.  1,  Justices  Harlan  and 
Gray  dissenting. 

2  Austin  V.  Tennessee,  179  U.  S.  343. 


§   115    STATE    TAXATION   AND    IMPORTS    AND    EXPORTS.         119 

and  shipments  from  one  State  to  another.  In  the  case  of 
foreign  importation,  the  State  cannot  exclude  nor  can  it 
tax  either  the  business  or  the  import,  so  long  as  the  latter 
is  in  the  hands  of  the  importer  in  its  original  packao-e. 
The  State  cannot  exclude  nor  prevent  the  sale  of  shipments 
from  another  State  in  the  original  packages,  but  it  can  tax 
them,  provided  it  does  so  without  discrimination  between 
that  and  the  other  property  of  the  State.  The  determina- 
tion of  what  is  an  original  package  therefore  becomes 
important,  both  with  reference  to  the  police  and  the  taxino- 
authority  of  the  State. 

In  a  recent  case  from  Louisiana  the  Supreme  Court  held 
that  the  "  original  package  ' '  means  the  box  or  case  in  which 
the  goods  are  shipped,  and  not  the  package  in  which  they 
were  placed  by  the  manufacturer  when  manufactured,  and 
before  they  were  encased  in  the  larger  boxes  for  shipment.^ 
Thus  packages  of  laces,  household  linens,  etc.,  were  held 
to  lose  their  exemption  when  taken  out  of  the  boxes  or 
cases  in  which  they  were  shipped.  The  court  said  that  to 
extend  the  exemption  to  the  manufacturer's  packages  would 
mean  that  the  power  of  the  State  to  tax  imported  goods 
would  depend  upon  the  form  in  which  the  European  manu- 
facturer or  packer  shipped  them  to  this  country.  Thus  if 
he  shipped  fifty  Geneva  watches,  all  he  need  do  would 
be  to  put  each  watch  in  a  separate  case. 

In  the  Pennsylvania  oleomargarine  case,  supra,  a  ten 
pound  package  of  oleomargarine  was  held  to  be  an  "  orio-- 
inal  package."  But  in  Austin  v.  Tennessee  the  paper 
packages  containing  ten  cigarettes  unboxed  or  thrown  loosely 
into  baskets  were  held  not  to  be  "original  packages" 
within   the    meaning    of    the    court's    decisions. 2     Justice 

1  May  V.  New  Orleans,  178  U.  S.  496,  affirming  51  La.  Ann.  1064,  four 
judges  dissenting,  Chief  Justice  Fuller  and  Justices  Brewer,  Shira's  and 
Peckhara. 

2  In  this  case  Justice  White  concurred  in  a  separate  opinion,  and 
Justices  Brewer,  Shiras  and  Peckham  and  Chief  Justice  Fuller  dissented. 


120        STATE   TAXATION   AND    IMPORTS   AXD    EXPORTS.    §   116 

Brown  in  the  opinion  sajs,  at  page  359:  "The  real 
question  in  this  case  is  whether  the  size  of  the  package 
in  which  the  importation  is  actually  made  is  to  govern  or 
the  size  of  the  package  in  which  bona  fide  transactions  are 
carried  on  between  the  manufacturer  and  the  wholesale 
dealer  residing  in  different  States.  AYe  hold  to  the  latter 
view."  And  after  describing  the  packages  he  sajs,l.  c.  p. 
361 :  "  And  jet  we  are  told  that  each  one  of  these  pack- 
ages is  an  original  package,  and  entitled  to  the  protection 
of  the  Constitution  of  the  United  States  as  a  separate  and 
distinct  importation..  We  can  only  look  upon  it  as  a 
discreditable  subterfuge  to  which  this  court  ought  not  to 
lend  its  countenance.  If  there  be  any  original  package 
at  all  in  this  case,  we  think  it  is  the  basket  and  not  the 
paper  box."  ^ 

§116.  Theory  of   exemption  of  original   packages  from 
State  laws. 

In  Austin  v.  Tennessee  the  court  thus  explains  the 
theory  of  the  exemption  of  the  original  package  from  the 
operation  of  State  laws,  1.  c.  page  359 :  — 

"The  whole  theory  of  the  exemption  of  the  original 
package  from  the  operation  of  State  laws  is  based  upon 
the  idea  that  the  property  is  imported  in  the  ordinary  form 
in  which,  from  time  immemorial,  foreign  goods  have  been 
brought  into  the  country.  These  have  gone  at  once  into 
the  hands  of  the  wholesale  dealers,  who  have  been  in  the 
habit  of  breaking  the  packages  and  distributing  their  con- 
tents among  the  several  retail  dealers  throughout  the  State. 

1  Fordi-cussionin  the  State  courts  of  what  is  an  "original  package" 
ser  Commonwealth  v  SchoUenbergtr,  156  Pa.  201,  reversed  by  the  Su- 
preme ciurt  supra;  Slate  v.  Parsons,  124  Mo.  430,  where  separate  medi- 
cine bottles  buxed  for  shipment  were  held  not  to  be  original  packages; 
Keith  V.  Alabama,  97  Ala.  32,  10  L.  R.  A.  430,  where  a  similar  ruling  was 
made  as  to  half-pint,  pint  and  quart  whisky  bottles. 


§    116    STATE  TAXATION   AND    IMPORTS   AND   EXPORTS.         121 

It  was  with  reference  to  this  method  of    doing  business 
that  the  doctrine  of  the  exemption  of  the  original  packao-e 
grew    up.      But  taking  the  words  "  original  package  "  in 
their  literal  sense,  a  number  of  so-caUed  original  packao-e 
manufactories    have   been   started   through   the  country, 
whose  business  it  is  to  manufacture  goods  for  the  express 
purpose   of  sending   their  products  into   other  States  in 
minute  packages,  that  may  at  once  go  into  the  hands  of 
the  retail  dealers  and  consumers  and  thus  bid  defiance  to 
the   laws    of    the    State    against    their    importation    and 
sale.     In    all    the    cases   which    have   heretofore    arisen 
in    this    court    the    packages   were    of  such    size    as   to 
exclude  the  idea  that  they  were  to  go  directly  into  the  hands 
of  the  consumer,  or  be  used  to  evade  the  pohce  regulations 
of  the  State  with  regard  to  the  particular  article.     No  doubt 
the  fact  that  .cigarettes  are  actually   imported  in  a  certain 
package  is  strong  evidence  that  they  are  original  packages 
within  the   meaning  of  the  law ;  but  this  presumption  at- 
taches only  when  the  importation  is  made  in  the  usual  man- 
ner prevalent  among  honest   dealers,    and  in  a  bona  fide 
package  of  a  particular  size.     Without   undertaking  to  de- 
termine what  is  the  proper  size  of  an  original  package  in  each 
case,  evidently  the  doctrine  has  no  application   where  the 
manufacturer  puts  up  the  package  with  the  express  intent 
of  evading  the  law  of  another  State,  and  is  enabled  to  carry 
out  his  purpose  by  the  facile  agency  of  an  express  company 
and  the  connivance  of  his  consignee.     This   court   has  re- 
peatedly  held   that,  so  far  from   lending  its  authority  to 
frauds  upon  the  sanitary  laws  of  the  several  States,  we  are 
bound  to  respect  such  laws  and  to  aid  in  their  enforcement, 
so  far  as  can  be  done  without  infringing  upon  the  constitu- 
tional rights  of  the  parties.     The  consequences  of  our  adop- 
tion of  defendant's  contention  would  be  far-reaching  and 
disastrous.     For  the  purpose   of    aiding  a  manufacturer  in 
evading  the  laws  of  a  sister  State,  we  should  be  compelled  to 


122    STATE  TAXATION  AND  IMPORTS  AXD  EXPORTS.  §  116 

recognize  anything  as  an  original  package  of  beer  from  a  hogs- 
head to  a  vial;  anything  as  a  package  of  cigarettes  from  an 
importer's  case  to  a  single  paper  box  of  ten,  or  even  a  sin- 
gle cigarette,  if  imported  separately  and  loosely;  anything 
from  a  bale  of  merchandise  to  a  single  ribbon,  provided 
only  the  dealer  sees  fit  to  purchase  his  stock  outside  the 
State  and  import  it  in  minute  quantities."  ^ 

1  Justice  White  in  his  concurring  opinion  said  that  if  he  thought 
either  the  opinion  or  the  conclusion  had  the  effect  of  weakening  the  doc- 
trine upheld  by  Leisy  v.  Hardin,  135  U.  S.  100,  and  Rhodes  v.  Iowa,  170  U. 
S.  412^  he  would  be  unable  to  concur.  But  under  all  the  circumstances 
he  was  constrained  to  conclude  that  each  particular  parcel  of  cigarettes 
was  not  an  "original  package"  as  defined  by  the  previous  adjudications 
of  the  court.  Justice  Brewer  in  his  dissenting  opinion,  concurred  in  by 
Chief  Justice  Fuller  and  Justices  Shiras  and  Peckham,  said  that  the  case 
was  reversed  on  the  single  proposition  of  the  size  of  the  package  of  cigar- 
ettes, and  that  he  searched  the  Constitution  of  the  United  States  in  vain 
for  any  intimation  that  the  power  of  Congress  over  interstate  commerce 
ceases  when  the  packages  in  which  that  commerce  is  carried  are  of  any 
particular  size.  And  on  page  381  he  said :  "  Apparently  the  dividing  line 
as  to  the  size  of  packages  must  be  somewhere  between  that  of  a  tea 
pound  package  of  oleomargarine  and  that  of  a  package  of  ten  cigarettes; 
but  where?  Must  diamonds,  in  oxder  to  be  within  the  protecting  power 
of  the  nation,  be  carried  from  State  to  State  in  ten-pound  packages?  " 
And  on  the  suggestion  that  diamonds  are  not  a  subject  of  police  regulation, 
while  cigarettes  are,  he  says :  "  Concretely  it  amounts  to  this :  the  police 
power  of  the  State,  the  power  exercised  to  preserve  the  health  and 
morals  of  its  citizens,  may  prevent  the  importation  and  sale  of  a  pint  of 
whisky,  but  cannot  prevent  the  importation  and  sale  of  a  barrel;  or  in 
other  words,  the  greater  the  wrong  which  is  supposed  to  be  done  to  the 
morals  and  health  of  the  community,  the  less  the  power  of  the  State  co 
prevent  it.  That  may  be  constitutional  law,  but  to  my  mind  it  lacks  the 
saving  element  of  common  sense."  He  said  further  that  Chief  Justice 
Marshall  had  said,  in  Brown  v.  Maryland:  "'In  the  original  form  or 
package  in  which  it  was  imported,'  not  in  which  '  it  might  have  been '  or 
*  ought  to  have  been  imported.'  Obviously  it  did  not  occur  to  him  that 
the  form  or  package  which  the  importer  might  adopt  in  any  way  affected 
the  power  of  Congress  over  the  importation."  The  court,  he  continued, 
should  not  overlook  the  changes  in  the  modes  of  transportation.  At  the 
time  that  Chief  Justice  Marshall  wrote  the  opinion  in  Brown  v.  Maryland, 
transportation  was  carried  on  by  water  in  sailing  vessels,  and  on  land 
largely  in  lumber  wagons.    It  is  not  strange  that  at   that  time  all  Irans- 


§   118    STATE   TAXATION   AND    niPORTS    AND    EXPORTS.         123 

§  117.  Exemption  only  extends  to  importer. 

The  exemption  from  taxation  of  imported  goods  in  the 
original  packages  applies  only  in  fa^or  of  the  importer, 
and  therefore  does  not  extend  to  the  goods,  even  while 
they  are  in  the  original  packages,  after  they  have  been  sold 
by  him.  Thus,  in  Waring  v.  The  Mayor, ^  goods  imported 
in  the  original  packages  were  sold  Avhile  still  on  the  vessel, 
which  was  anchored  in  the  harbor  waiting  for  the  lighters 
to  load  her  cargoes  and  carry  them  to  the  town.  They 
were  held  subject  to  taxation  as  the  property  of  the  pur- 
chaser, and  such  purchaser  could  be  taxed  upon  his  occupa- 
tion or  the  amount  of  his  sales.  In  this  case  the  purchaser 
was  in  the  habit  of  buying  the  entire  cargo  and  selling  it  in 
the  original  packages  to  traders.  Merchandise  in  the 
original  packages  when  once  sold  by  the  importer  is  there- 
fore taxable  like  other  property,  provided  of  course  it  is 
taxed  without  discrimination,  as  it  has  lost  its  distinctive 
character  as  an  import. 

§  118.  Form  of  tax  is  immaterial. 

It  is  immaterial  whether  the  tax  be  imposed  upon  the 
goods  as  imports,  or  upon  the  goods  as  part  of  the  general 
property    of    the    importer   which   is  subject    to   an   ad 

portation  was  of  goods  packed  in  large  boxes,  securely  fastened  to  pre- 
vent accidents  from  the  rough  and  tumble  way  of  transportation.  There 
were  then  no  express  companies  for  the  carrying  of  small  packages.  All 
that  mode  of  transportation  has  grown  up  in  this  country  within  the  last 
sixty  years.  But  the  express  companies  carrying  their  small  packages 
from  Slate  to  State  are  just  as  certainly  engaged  in  interstate  commerce 
as  the  old-fashioned  lumber  wagons  carrying  commodities  between  the 
same  places.  The  facilities  of  transportation  are  increasing  rapidly, 
and  with  them  the  cost  of  such  transportation  is  diminishing,  so  that 
more  and  more  will  it  be  true  that  the  small  packages  will  be  the  fre- 
quent subject  of  transportation  as  between  State  and  State,  He  there- 
fore insisted  that  it  was  for  Congress,  and  not  for  the  State,  to  make 
modifications  in  the  rule,  if  circumstances  required. 
1  8  Wallace,  110. 


124        STATE   TAXATION   AND   IMPORTS    AND    EXPORTS.    §    119 

valorem  tax.^  So  the  exemption  extends  to  the  goods  in  the 
original  packages  in  the  warehouse  so  long  as  they  remain 
the  property  of  the  importer.^  A  tax  is  likewise  invalid 
which  is  laid  by  a  State  on  the  amount  of  sales  made  by 
an  auctioneer,  when  applied  to  the  imported  goods  in  the 
orio-inal  packages.^  An  importer  has  the  right  not  only  to 
sell  in  person,  but  also  to  employ  an  agent  to  sell  for  him, 
and  this  right  to  seU  cannot  be  made  to  depend  upon 
whether  the  original  package  is  suitable  for  the  retail  trade 
or  not,  provided  it  is  a  honajide  package,  not  made  for  the 
purpose  of  evading  the  law.* 

In  Cook  V.  Pennsylvania,  the  court  held  that  a  tax  on 
sales  made  by  an  auctioneer  is  a  tax  on  the  goods  sold, 
within  the  terms,  of  Waring  v.  The  Mayor,  and  indeed 
of  all  the  decisions  cited;  and  when  appUed  to  foreign 
goods  sold  in  the  original  packages  by  the  importer,  before 
they  become  incorporated  into  the  general  property  of  the 
country,  the  law  imposing  such  tax  is  void  as  laying  a  duty 
on  imports. 

§  119.  Intent  to    export   is    insiifficient  to  exempt  from 
taxation. 

The  fact  that  capital  is  uniformly  and  continuously  em- 
ployed in  the  business  of  purchasing  goods  for  exportation 
from  the  United  States  to  foreign  countries  is  not  sufficient 
to  avoid  an  assessment  on  the  ground  that  it  is  money  em- 
ployed in  exportation,  if  such  capital  is  in  fact  on  hand  as 
money  on  the  day  the  assessment  is  made.  The  court  said  ^ 
that  as  it  did  not  appear  that  the  capital  in  question  was 
actually  invested  in  goods  for  export  on  that  day,  it  was  not 

1  Low  V.  Austin,  13  Wallace,  29. 

2  Siegfried  v.  Raymond,  190  111.  424. 

3  Cook  V.  Pennsylvania,  97  U.  S.  566. 

*  See  SchoUenberger  v.  Pennsylvania,  and  Austin  v.  Tennessee,  supra. 
s  People  V,  Commissioners,  104  U.  S.  466. 


§    120    STATE   TAXATION   AND    IMPORTS   AND   EXPORTS.         125 

necessary  to  decide  what  would  have  been  the  effect  if  it 
had  been  so  invested. 

§  120.  Property  in  commercial  transit. 

The  same  principle  applies  to  the  claim  of  exemption 
from  taxation  on  the  ground  that  property  is  actually  in 
commercial  transit.  Property  which  is  in  commercial  tran- 
sit through  a  State  has  no  situs  for  taxation  therein, 
whether  destined  for  another  State  or  for  foreign  shipment. 
Any  attempt  therefore  by  a  State  to  tax  such  property  is 
a  direct  interference  with  interstate  commerce.  But  the 
property  must  be  actually  in  transit.  Intent  to  export 
property  or  to  send  it  to  another  State  is  not  sufficient  to 
exempt  it  from  taxes. 

It  is  not  necessary  that  property  should  be  actually  on 
the  cars  or  steamers,  as  it  has  been  held  to  be  in  commercial 
transit  when  it  is  at  the  point  of  shipment  awaiting  loadino-. 
Thus  also  delay  within  the  State  no  longer  than  is  neces- 
sary for  convenient  trans-shipment  to  its  destination  will 
not  give  the  property  a  situs  in  the  State,  so  as  to  subject 
it  to  the  State's  taxing  laws.^  Where  corn  had  been  re- 
moved from  its  place  of  production  and  placed  temporarily 
in  cribs  to  await  loading  on  cars  for  shipment,  it  was  held 
to  have  no  taxable  situs  as  property  of  the  non-resident 
owner,  the  court  saying,  at  page  747  :  2 

"It  would  seriously  cripple  and  obstruct  commerce  in 
the  productions  of  this  State  and  thus  inflict  a  great  injury 
upon  our  own  people  if  a  purchaser  could  not  temporarily 
deposit  the  property  purchased  in  cribs  or  warehouses  to 
await  the  means  of  transportation." 


1  State  V.  Engle,  34  N.  J.  L.  425. 

2  Ogilvie  V.  Crawford  County,  U.  S.  Cir.  Ct.  of  Iowa,  7  Fed.  Rep.  745. 
The  court  distinguished  the  case  of  Carrier  v.  Gordon,  21  Ohio,  605,  as 
there  the  property  was  not  in  transit,  but  plaintiffs  intended  to  remove 
It  on  the  opening  of  navigation. 


126         STATE   TAXATION   AND    IMPORTS   AND    EXPORTS.    §    121 

But  the  intent  to  export  is  not  sufficient. ^  The  goods 
must  be   actually  in  commercial  transit. 

§  121.  Coe  V.  Errol. 

A  leading  and  illustrative  case  on  this  point  is  Coe  v. 
Errol. ^  The  plaintiff,  a  resident  of  New  Hampshire,  owned 
spruce  logs,  drawn  down  during  the  winter  before  from 
the  mountains  of  New  Hampshire  to  the  banks  of  a  stream 
in  the  town  of  Errol,  New  Hampshire,  thence  floated  down 
the  river  in  the  spring  to  the  State  of  Maine.  It  was  held 
that  they  were  properly  appraised  for  taxation  in  Errol. 

The  court  decided,  opinion  by  Justice  Bradley,  that  the 
products  of  a  State,  though  intended  for  exportation  and 
partially  prepared  for  that  purpose,  are  liable  to  be  taxed 
like  other  property  at  the  point  where  they  are  deposited, 
and  that  they  are  not  exempted  from  taxation  by  the 
owner's  preparation  to  ship  them;  that  this  is  not  the  case. 
of  goods  in  course  of  traus})ortation  through  a  State, 
though  detained  for  a  time  therein,  by  low  water  or  other 
causes.  When  the  products  of  the  faim  or  forest  are 
collected  and  brought  in  from  the  surrounding  country  to  a 
town  or  station  serving  as  an  entrepot  for  that  particular 
region,  whether  on  a  river  or  railroad,  such  products  are 
not  yet  in  process  of  transportation,  but  they  are  a  part  of 
the  general  mass  of  property  in  the  State,  subject  to  its 
jurisdiction,  in  the  same  way  as  other  property  therein. 
They  cannot  be  taxed  as  exports  ;  they  are  not  yet  exported 
and  may  never  be  exported.  The  mere  intention  to  export 
is  not  sufficient.  The  court  declared  that,  if  the  intention 
to  export  were  sufficient,  in  many  States  there  would  be 
nothing  left  to  tax  but  real  estate,  and  added,  1.  c.  page 
528:  — 

1  Myers  v.  Baltimore  County  Commissioners,  83  Md.  385. 

2  116U.  S.  517. 


§    122    STATE    TAXATION    AXD    IMPORTS    AND    EXPORTS.  127 

"  Carrying  it  from  the  farm,  or  the  forest,  to  the  depot 
is  only  an  interior  movement  of  the  property,  entirely  within 
the  State,  for  the  purpose,  it  is  true,  but  only  for  the  pur- 
pose, of  putting  it  into  a  course  of  exportation;  it  is  no  part 
of  the  exportation  itself.  Until  shipped  or  started  on  its  final 
journey  out  of  the  State,  its  exportation  is  a  matter  alto- 
gether «n/eW,  and  not  at  all  a  fixed  and  certain  thino-." 

§  122.  Same  rule  in  interstate  as  in  foreign  shipments. 

In  its  opinion  in  this  case  the  court  used  the  words  "ex- 
port" and  "exportation"  in  reference  to  a  shipment  to 
another  State,  although  it  had  already  held  in  Woodruff  v. 
Parham,  supra,  that  the  terms  "  imports  "  and  "  exports  " 
as  used  in  the  Constitution  in  the  clause  under  considera- 
tion referred  only  to  foreign  shipments.  The  principle  is 
obviously  the  same  whether  the  shipments  are  intended  for 
another  State  or  for  a  foreign  country.  In  either  case  the 
goods  must  be  actually  in  transportation  or  awaiting  the 
means  of  transportation  to  be  exempt  from  the  taxing  power 
of  a  State. 

In  a  case  decided  at  the  following  term,i  the  principle 
laid  down  in  Coe  v.  Errol  was  considered  with  reference  to 
the  prohibition  upon  Congress  in  the  Constitution  aoainst 
taxmg  exports.  The  court  held  that  an  excise  laFd  on 
tobacco  requiring  it  to  be  stamped  before  it  is  removed 
from  the  factory  is  not  a  duty  on  exports,  even  though  the 
tobacco  be  intended  for  exportation.  It  stated  that  1  gen- 
eral tax,  laid  on  all  property  alike,  and  not  levied  on  goods 
in  course  of  exportation,  nor  because  of  their  intended  ex- 
portation, is  not  within  the  constitutional  prohibition.  "  How 
can  the  officers  of  the  United  States,  or  of  the  State,  know 
that  goods  apparently  part  of  the  general  mass  and  not  in 
course  of  exportation,  will  ever    be  exported?     Will  the 

»  Turpin  o.  Burgess,  117  U.  S.  504. 


128        STATE   TAXATION   AND   IMPORTS    AND   EXPORTS.    §   123 

mere  word  of  the  owner  that  they  are  intended  for  exporta- 
tion make  them  exports?  This  cannot  for  a  moment  be 
contended.  It  would  not  be  true  and  would  lead  to  the 
greatest  frauds."     And  the  court  added  at  page  507  :  — 

"It  is  true,  as  was  conceded  in  Coe  v.  Errol,  that  the 
prohibition  to  the  States  against  laying  duties  on  imports  or 
exports  related  to  imports  from  and  exports  to  foreign 
countries ;  yet  the  decision  in  that  case  was  based  on  the 
postulate  .that  when  such  imposts  or  duties  are  laid  on 
imports  or  exports  from  one  State  to  another  it  amounts  to 
a  regulation  of  commerce  among  the  States,  and,  there- 
fore, is  an  invasion  of  the  exclusive  power  of  Congress. 
So  that  the  analogy  between  the  two  oases  holds  good, 
and  what  would  be  constitutional  or  unconstitutional  in  the 
one  case  would  be  constitutional  or  unconstitutional  in  the 
other." 

§  123.  Taxation  of  floating  logs  and  droves  of  slieep. 

The  same  principle  was  applied  in  the  case  of  pine  logs, 
cut  in  Wisconsin,  and  put  upon  the  ice  for  the  purpose  of 
floating  them  down  stream  to  the  St.  Croix  river  as  soon  as 
there  was  sufficient  rise  in  the  river.  The  court  held  that 
the  logs  were  properly  taxed  in  the  town  where  so  held, 
while  they  were  in  preparation  for  transit;  ^  and  said  it  was 
immaterial  that  they  might  be  taxed  over  again  when  they 
reached  Minnesota  and  that  this  would  amount  to  a  second 
tax  in  the  same  year. 

So  sheep  driven  through  a  State  have  been  held  subject 
to  taxation,  if  the  purpose  of  driving  is  not  wholly  trans- 
portation, but  comprehends  also  grazing  them  upon  the 
natural  grasses,  not  as  a  mere  incident  to  the  travel,  but  as 
one  of  the  purposes  of  the  movement.  The  court  said  the 
existence    of   a  purpose  to    obtain  grazyig  for  the    sheep 

1  Nelson  Lumber  Co.  v.  Town  of  Loraine,  22  Fed.  Kep.  54. 


§    124    STATE    TAXATION    AND    IMPORTS    AND    EXPOETS.  129 

united  with  the  purpose  of  transportation  is  to  be  deter- 
mined from  all  the  facts  in  the  case,  including  the  course, 
the  character  of  the  territory  grazed  over,  the  time 
employed,  the  method  of  subsequent  shipment  intended, 
the  ordinary  facilities  for  transportation  by  other  means, 
the  place  selected  for  commencing  the  drive  and  perhaps 
the  time  of  3'ear,  and  the  eventual  purpose  of  their  trans- 
portation.^ 

§  124.  Termination  of  commercial  transit. 

The  subject  of  commercial  transit  was  recently  considered 
by  the  Supreme  Court  with  reference  to  the  police  power 
of  the  State,  the  particular  point  in  issue  being  the  time 
when  goods  shipped  into  a  State  become  subject  to  its  police 
laws.  It  was  held''  that  the  statute  of  Iowa  makinof  it  a 
misdemeanor  for  any  express  or  railway  company  to  trans- 
port any  intoxicating  liquors  from  one  place  to  another 
within  the  State,  without  being  furnished  a  certificate  from 
the  county  auditor  that  the  consignee  was  authorized  to  sell 
such  intoxicating  liquors,  could  not  be  applied  to  a  box  of 
liquors  shipped  by  rail  from  a  point  in  Illinois  to  a  citizen 
of  Iowa  at  his  residence  in  that  State,  while  in  transit  from 
its  point  of  shipment  to  its  delivery  to  the  consignee,  with- 
out causing  the  Iowa  law  to  be  repugnant  to  the  Constitu- 
tion of  the  United  States.  Moreover,  movinof  such  Poods 
in  the  station  from  the  platform  on  which  they  were  put  on 
arrival  to  the  freight  Avarehouse  was  a  part  of  the  interstate 
commerce  transportation.  The  court  in  this  case  construed 
the  Act  of  Congress  of  August  8,  1890^  supra,  §  107,  pro- 
viding that  liquors  transported  into  a  State  should  upon 
arrival  become  subject  to  its  laws.  The  court  said  that  the 
word  "  arrival  "  did  not  mean  arrival  at  the  State  lines,  but 

»  Kelley  v.  Rhodes  (Wyo.),  39  L.  R.  A.  594. 
2  Rhodes  v.  Iowa,  170  U.  S.  412. 

9 


130         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.     §    125 

arrival  at  their  destination  in  the  State  and  dehvery  there  to 
the  consig-nee.  This  construction  of  the  statute  rendered 
it  unnecessary  to  consider  whether,  if  the  Act  of  Congress 
had  submitted  the  right  to  make  interstate  commerce  ship- 
ments to  State  control,  it  would  be  repugnant  to  the  Con- 
stitution.^ Although  this  decision  was  with  reference  to 
the  police  power  of  the  State,  the  reasoning  would  seem 
equally  applicable  to  the  exercise  of  the  taxing  power.  The 
decision  turned,  not  upon  the  question  of  what  constituted 
an  original  package,  but  upon  whether  the  commercial 
transit  was  concluded.  As  it  was  not  ended  when  it  was 
in  the  freight  warehouse  of  the  railroad  company  awaiting 
delivery,  it  was  still  in  commercial  transit,  and  therefore  not 
subject  to  either  the  taxing  or  the  police  laws  of  the  State. 

§  125,  Inheritance  tax  on  aliens  not  tax  on  exports. 

A  law  of  Louisiana  imposed  a  tax  of  ten  per  cent  upon 
the  inheritance  going  to  any  person  not  domiciliated  in  that 
State  and  not  a  citizen  of  any  State  or  Territory  in  the 
Union.  It  was  claimed  that  this  was  essentially  a  tax  upon 
exports,  and  repugnant  to  the  power  of  Congress  to  regu- 
late commerce  with  foreign  nations.  But  the  court  held, 
opinion  by  Chief  Justice  Taney  ,2  that  the  tax  was  nothing 
more  than  the  exercise  of  the  power  which  every  State  and 
sovereignty  possesses  of  regulating  the  manner  and  terms 
on  which  property,  real  or  personal,  within  its  dominion, 
may  be  inherited.  Every  State  or  nation  may  unquestion- 
ably refuse  to  allow  an  alien  to  take  either  real  or  personal 
property  situated  within  its  limits,  either  as  heir  or  lega- 
tee, and  may,  if  it  thinks  proper,  direct  that  property  so 

1  Justices  Gray,  Harlan  and  Brown,  dissenting,  said  tliat  there  had 
been  an  arrival  in  the  State  so  as  to  subject  the  liquor  to  the  exer- 
cise of  the  police  power  of  Iowa  within  the  letter  and  spirit  of  the 
Act  of  Congress. 

2  Mager  v.  Grima,  8  How.  490. 


§    126    STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.  131 

descending  or  bequeathed  shall  belong  to  the  State.  It 
was  held  also  that  the  constitutionality  of  inheritance  laws 
imposing  taxation  upon  the  State's  own  citizens  is  unques- 
tioned, and  it  cannot  be  contended  that  aliens  are  entitled 
to  any  exemption.  Indeed  the  court  could  see  no  objection 
to  such  a  tax,  even  if  imposed  upon  aliens  exclusively.  It 
had  no  concern  with  commerce  or  with  exports.  In  answer 
to  the  argument  that  it  was  a  tax  on  exports  because  it 
would  be  necessary  to  send  abroad  the  inheritance,  the 
court  said  that,  if  that  argument  was  sound,  no  property 
would  be  liable^  to  be  taxed  in  a  State  when  the  owner 
intended  to  convert  it  into  money  and  send  it  abroad. 

§  126.  License  tax  on  forelgn-excliange  broker  not  tax 
on  exports. 

A  license  tax  of  four  hundred  and  fifty  dollars,  levied  by 
the  State  of  Louisiana  on  money  and  exchange  brokers, 
was  sustained  in  the  case  of  a  broker  who  claimed  that  it 
was  invalid  as  to  him,  because  he  dealt  in  foreign  exchange 
exclusively,  and  that  the  taxing  of  bills  of  exchange  was 
taxing  the  necessary  instruments  of  commerce.  But  the 
Court  held  ^  that  this  was  not  a  tax  on  the  bills  of  exchange, 
which  under  the  law  every  person  was  free  to  buy  or  sell, 
but  the  tax  was  imposed  for  engaging  in  the  business  of  a 
money  or  exchange  broker.  If  a  tax  on  the  business  of  an 
exchange  broker  were  invalid,  all  taxes  on  banks  which 
deal  in  bills  of  exchange  would  be  invalid.  No  one  can 
claim  an  exemption  from  a  general  tax  on  the  ground  that 
the  product  sold  may  be  used  in  commerce.  The  court 
concluded,  page  82  :  — 

"  The  taxing  power  of  a  State  is  one  of  its  attributes  of 

1  Nathan  v.  Louisiana,  8  How.  73.  See  Fairbank  v.  United  States,  181 
n.  S.  283,  holding  a  Federal  tax  on  foreign  bills  of  lading  a  tax  on  ex- 
ports. 


132         STATE    TAXATION    AND    IMPORTS    AND    EXPORTS.    §    127 

sovereignt}^  And  where  there  has  been  no  compact  with 
the  Federal  government,  or  cession  of  jurisdiction  for  the 
purposes  specified  in  the  Constitution,  this  power  reaches 
all  property  and  objects  in  the  State  which  are  not  properly 
denominated  the  means  of  the  general  government,  and  as 
laid  down  by  this  court,  it  may  be  exercised  at  the  discretion 
of  the  State.  *  *  *  Whatever  exists  within  its  terri- 
torial limits  in  the  form  of  property,  real  or  personal,  with 
the  exception  stated,  is  subject  to  its  laws;  and  also  the 
numberless  enterprises  in  which  its  citizens  may  be  en- 
gaged. These  are  subjects  of  State  regulation  and  State 
taxation  and  there  is  no  Federal  power  under  the  Constitu- 
tion which* can  impair  this  exercise  of  State  sovereignty." 

§  127.  State  taxing  power  in   relation   to    imports    and 
exports. 

In  the  case  last  cited  the  court  further  defined  the  tax- 
ing power  of  the  State  in  relation  to  the  prohibition  of 
duties  on  imports  and  exports  as  follows,  1.  c.  p.  81 :  — 

"  No  State  can  tax  an  export  or  an  import  as  such,  ex- 
cept under  the  limitations  of  the  Constitution.  But  before 
the  article  becomes  an  export,  or  after  it  ceases  to  be  an 
import,  by  being  mingled  with  other  property  in  the  State, 
it  is  a  subject  of  taxation  by  the  State.  A  cotton  broker 
may  be  required  to  pay  a  tax  upon  his  business,  or  by  way 
of  license,  although  he  may  buy  and  sell  cotton  for  foreign 
exportation." 

This  was  quoted  and  applied  by  the  Court  of  Appeals  of 
Mar^dand,^  where  it  held  valid  a  license  tax  on  all  those 
engaged  in  packing  or  canning  oysters  for  sale  or  transport- 
ation, and  whose  place  of  business  was  in  the  State.  It 
was  claimed  that  the  words  ' '  for  transportation  ' '  made  the 
law  objectionable  as  an  interference  with  commerce.     The 

1  State  V.  Applegarth,  28  L.  R,  A.  812. 


§   128    STATE   TAXATION   AND    IMPORTS   AND    EXPORTS.         133 

court  said  that  the  words  ' '  for  sale  ' '  and  ' '  for  transporta- 
tion ' '  were  used  to  exempt  those  who  packed  or  canned 
oysters  for  their  own  purposes ;  and  further  that  the 
fact  that  oyster  packers  might  transport  their  oysters  out- 
side of  the  State  did  not  prevent  it  from  taxing  them  for 
the  prosecution  of  their  business  within  its  jurisdiction.* 

§  128.  State  tax  upon  alien  passengers  is  void. 

It  was  held  in  the  Passenger  Cases, ^  that  the  statutes  of 
New  York  and  Pennsylvania  imposing  taxes  upon  alien 
passengers  arriving  in  the  ports  of  those  States  were  void. 
There  is  no  opinion  of  the  court,  as  such,  as  to  the  grounds 
of  the  decision. "^  Prior  to  this,  in  State  of  New  York  v. 
Miln,*  a  statute  of  New  York  requiring  the  master  of  a 
vessel  to  render  the  mayor  a  verified  description  of  the 
names,  ages,  etc.,  of  passengers  was  declared  a  proper 
police  regulation. 

The  invalidity  of  the  State  tax  upon  passengers  was 
again  affirmed  in  1875,°  the  court  saying  that  the  rule, 
which  prescribed  the  terms  or  conditions  upon  which  a 
vessel  could  discharge  its  passengers  coming  from  foreign 
ports,  was  a  regulation  of  commerce  with  foreign  nations, 
and  that  it  was  immaterial  that  the  statute  did  not  come 
into  operation  until  after  the  passenger  had  landed. 

1  It  was  held  in  the  U.  S.  Circuit  Court  in  California,  In  re  Wong 
Yung  Quy,  2  Fed.  Rep.  624,  that  a  corpse  is  not  property ;  that  the 
remains  of  human  beings  carried  out  of  the  State  for  burial  in  a  foreign 
country  are  not  exports  within  meaning  of  the  Constitution,  and  that  the 
permit  fee  of  $10.00j  under  the  statute  of  California,  for  removal  of 
remains  of  deceased  persons,  was  valid  as  a  sanitary  measure. 

2  7  Howard,  283. 

3  See  statement  of  the  casein  Henderson  v.  Mayor,  92  U.  S.,  p.  269. 
*  11  Peters  103.    For  an  interesting  view  of  the  difference  of  opinion 

in  the  court  at  this  time,  see  remarks  of  Justice  Wayne,  7  How.  429  to 
436,  and  Chief  Justice  Taney,  pp.  487  to  490. 

6  Henderson  v.  Mayor  of  New  York,  92  U.  S.  259. 


134        STATE    TAXATION   AND    IMPORTS   AND    EXPORTS.     §    129 

Still  later,  in  1881,  another  statute  of  New  York  was 
declared  void,^  which  imposed  a  tax  on  every  alien  passen- 
ger and  held  the  vessel  liable  for  the  tax,  and  it  was 
immaterial  that  the  act  declared  its  purpose  to  be  to  raise 
money  for  the  execution  of  the  inspection  laws  of  the  State. 
The  court  said  it  was  not  valid  as  an  inspection  law,  as 
that  could  onh^  relate  to  property. ^ 

§  129.   State  inspection  laws  and  interstate  commerce. 

The  Constitution"^  excepts  from  the  prohibition  laid  upon 
the  States  to  levy  duties  on  imports  or  exports  what 
may  be  absolutely  necessary  for  executing  their  inspection 
laws.  The  Supreme  Court  held  that  the  tobacco  inspection 
laws  of  Maryland  were  valid  under  this  clause,  and  that  the 
charges  upon  the  tobacco  for  outage  and  storage  were  author- 
ized by  the  Constitution.*  Such  charges  were  for  services 
rendered  and  were  therefore  lawful.  It  was  claimed  that  the 
act  discriminated  between  different  classes  of  exporters,  in 
that  it  exempted  from  certain  regulations  those  who 
packed  tobacco  for  exportation  in  the  county  or  neigh- 
borhood where  it  was  grown.  But  the  court  held  that 
such  discriminations  the  State  had  the  right  to  make. 
It  did  not  however  express  any  opinion  as  to  the  pro- 
visions of  the  Maryland  law  for  the  inspection  of  tobacco 
grown  out  of  Maryland. 

The  inspection  law  of  North  Carolina  was  also  sustained 
by  the   Supreme  Court.*     A  charge  of  twenty-five   cents 

1  People  V.  Compagnie  Gen.  Trans-Atlantique,  107  U.  S.  59. 

2  Iq  Head  Money  Cases,  112  U.  S.  580,  the  court  sustained  an  act  of 
Congress  imposing  a  duty  of  fifty  cents  on  every  alien  passenger  coming 
into  the  United  States  in  steam  or  sailing  vessels.  See  also  Crandall  v. 
Nevada,  supra,  §  20. 

3  Article  1,  Section  10,  paragraph  2. 
*  Turner  v.  Maryland,  107  U.  S.  38. 

5  Petapsco  Gua»o  Co.  v.  North  Car.  Board  of  Agriculture,  171  U.  S. 
345. 


§   129    STATE   TAXATION   AND    IMPORTS    AND    EXPORTS.         135 

per  ton  upon  fertilizers,  to  pay  the  cost  of  inspection,  was 
held  to  be  reasonable  and  proper.  The  court  said  that,  as 
it  was  competent  for  the  State  to  pass  laws  of  this  charac- 
ter, the  requirement  of  inspection  and  payment  of  the  costs 
did  not  bring  the  act  into  collision  with  the  power  vested 
in  Congress.  The  right  to  make  inspection  laws  was  not 
granted  to  Congress,  but  was  reserved  to  the  States,  sub- 
ject however  to  the  paramount  right  of  Congress  to  regulate 
foreign  commerce  and  among  the  several  States.  If  the 
charge  should  exceed  what  was  necessary  for  executino-  the 
inspection  laws,  it  would  be  an  unauthorized  interference 
with  the  free  importation  of  goods  and  therefore  void. 
But  if  the  law  is  really  an  inspection  law  the  charge  fixed 
by  the  State  must  stand  until  Congress  shall  see  fit  to  alter 
it  in  its  paramount  power  over  commerce.  This  right  to 
make  inspection  laws  applies  to  commerce  between  the 
States  as  well  as  to  foreign  commerce,  although  the  words 
imports  and  exports  in  the  same  section  relate  only  to 
foreign  commerce.  The  scope  of  inspection  laws  is  not 
confined  to  articles  intended  for  exportation,  but  applies  to 
importations  and  articles  intended  for  domestic  use.i 

1  Neilson  v.  Garza,  2  Woods,  287.  As  to  when  the  court  will  take 
judicial  notice  that  the  amount  charged  is  unreasonably  large  for  an 
inspection  charge,  see  American  Fertilizing  Co.  v.  Board  of  Agriculture 
of  North  Carolina,  43  Fed.  Rep.  609. 


CHAPTER    lY. 


REGULATION  OF  COMMERCE  CONTINUED. 

§  130.  Era  of  discriminating  State  taxation. 

131.  Privileges  and  immunities  of  citizens. 

132.  Any  discrimination  in  State  taxation  in  favor  of  citizens  or  resi- 

dents   as    against    non-residents    is    interference    with   com- 
merce. 

133.  Discriminating  taxation  condemned  in  State  courts. 

134.  Discrimination  in  taxation  in  favor  of  products  of  State  as  against 

products  of  otiier  States  invalid. 

135.  Supreme  Court  in  Walton  v.  Missouri. 

136.  What  constitutes  discrimination. 

137.  Discrimination  must  relate  to  interstate  commerce. 

138.  Taxation  of  commercial  travelers  from  other  States  invalid. 

139.  Supreme  Court  in  Robbins  v.  Shelby  County  Taxing  District. 

140.  Interstate  commerce  cannot  be  taxed  at  all. 

141.  Doctrine    of    Robbins    v.   Shelby  County  Taxing  District  reaf- 

firmed. 

142.  Supreme  Court  in  Brennan  v.  Titusville. 

143.  Taxation  of  commercial  brokers. 

144.  Supreme  Court  la  Ficklen  v.  Shelby  County  Taxing  District. 

145.  Stockard  v.  Morgan  on  commercial  brokers. 

146.  The  form  of  commercial  agency  immaterial. 

147.  Only  interstate  commerce  agencies  exempt. 

148.  Sale  of  goods  in  State  subject  to  taxing  power  of  State. 

149.  Discrimination  must  be  more  than  incidental  disadvantage. 

150.  Tax  upon  peddlers  without  discrimination  as  against  residents 

or  subjects  of  other  States  is  valid. 

151.  Definition  of  peddler. 

152.  Peddlers  and  drummers. 

153.  Licensing  under  police  power. 

154."  Police  power  cannot  interfere  with  interstate  commerce. 

155.  Supreme  Court  not  concluded  by  title  as  to  purpose  of  act. 

156.  Is  license  act  void  in  part,  void  in  toto'? 
(136) 


§   130     INTERFERENCE    WITH    INTERSTATE    COMMERCE.  137 

"The  citizens  of  each  State  shall  be  entitled  to  all  privileges  and 
immunities  of  citizens  ,in  the  several  States."  Const.  U.  S.,  Art.  IV,, 
Sec.  2. 


§  130.  Era  of  discriminating  State  taxation. 

The  enforcement  of  the  national  control  over  interstate 
commerce  has  been  prolific  of  litigation,  both  in  the  State 
an4  Federal  courts,  arising  out  of  the  conflict  between  the 
national  supremacy  on  the  one  hand,  and  the  authority  of 
the  States  to  impose  business,  occupation  and  so-called 
privilege  taxes  on  the  other.  The  clamor  of  local  mer- 
chants for  protection  against  competition  from  other  States 
has  been  potent  with  State  legislatures,  as  it  was  in  the 
days  of  the  Confederation  before  the  adoption  of  the  Con- 
stitution, and  the  result  has  been  the  enactment  of  discrim- 
inations in  taxation  favoring  the  citizens  and  the  goods  and 
products  of  the  State  as  against  the  citizens  and  products 
of  other  States.  During  the  long  period  when  the  Supreme 
Court  gave  no  decided  opinion  as  to  the  supremacy  of  the 
national  power  in  interstate  commerce,  such  discriminating 
statutes  multiplied,  until,  in  one  form  or  another,  they 
were  on  the  statute  books  of  nearly  every  State  in  the 
Union.     Thus  Justice  Miller  said  in  1889  :  ^  — 

"  Notwithstanding  for  nearly  one  hundred  years  we  have 
had  in  the  Federal  Constitution  the  declaration  that  Con- 
gress shall  have  power  to  regulate  commerce  among  the 
several  States,  there  are  at  this  hour  upon  the  statute 
books  of  almost  every  State  laws  violating  that  provision ; 
and  there  is  no  doubt  that  if  that  clause  were  removed  to- 
morrow, this  Union  would  fall  to  pieces,  simply  by  reason 
of  the  struggles  of  each  State  to  make  the  propertj^  owned 
in  other  States  pay  its  expenses.  It  was  this  tendency  of 
each  State  to  support  its  government  out  of  taxes  levied 
upon  the  property  of  other  States,  or  on  the  produce  or 

1  Lectures  on  the  Constitution,  p.  81. 


138  IXTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    131 

merchandise  which  must  go  through  one  State  to  another, 
that  more  than  any  other  one  thing  compelled  the  for- 
mation of  the  present  Constitution."  ^ 

The  declaration  of  the  Supreme  Court  in  the  cases 
already  referred  to,  that  commerce  between  the  States  must 
be  free  from  State  control  or  interference,  was  announced 
at  a  time  when  changed  economic  conditions  made  intoler- 
able the  discriminating  legislation  of  the  States.  The 
extension  of  railroad  systems  over  the  country,  the  promo- 
tion of  facilities  of  intercourse  and  transportation,  unknown 
at  an  earlier  period,  extended  the  market  available  to  pro- 
ducers. Instead  of  the  buyer  seeking  in  his  own  locality 
the  manufacturer  or  jobber,  an  army  of  commercial  trav- 
elers covered  the  countr}^  bringing  the  goods  of  the  man- 
ufacturer and  jobber  to  the  door  of  the  retailer  or  con- 
sumer.    The  methods  of  business  were  revolutionized. 

§   131.  Privileges  and  immunities  of  citizens. 

Where  citizens  of  other  States  are  concerned,  not  only 
is  this  discrimination  in  taxation  in  favor  of  citizens  or 
residents  of  the  State  an  interference  with  commerce,  but 
at  this  point  the  comprehensive  provision  of  the  Constitu- 
tion for  the  regulation  of  commerce  is  reinforced  by  the 
specific  direction  in  the  Constitution  that  "  citizens  of  each 
State  shall  be  entitled  to  all  the  privileges  and  immunities 
of  citizens  in  the  several  States."  This  specific  protection 
accorded  to  citizens  of  other  States  however,  while  it  is 
included  in  the  comprehensive  guaranty  of  national  control 
over  commerce,  falls  far  short  of  affording  the  necessary 

1  Justice  Miller  quotes  from  Mr.  Van  Buren  in  a  speech  in  the  Senate 
in  1826:  "There  are  few  States  in  the  Union  upon  whose  acts  the  seal 
of  coademnation  has  not  from  time  to  time  been  placed  by  the  Supreme 
Court.  The  sovereign  authorities  of  Vermont,  New  Hampshire,  New 
York,  New  Jersey,  Pennsylvania,  Maryland,  Virginia,  North  Carolina, 
Missouri,  Kentucky  and  Ohio  have  In  turn  been  rebuked  and  silenced 
by  the  overruling  authority  of  this  court." 


§    132    INTERFERENCE    WITH   INTERSTATE    COMMERCE.  139 

remedy.  The  right  to  cany  on  interstate  commerce  and  to 
be  free  from  discriminating  restrictions  therein  is  not  lim- 
ited to  citizens.  All  non-residents  of  the  State,  and  for- 
eign corporations,  which  are  not  citizens  within  the  mean- 
ing of  Article  IV,  Section  2,  are  entitled  to  the  protection 
of  the  Constitution  in  so  far  as  they  are  engaged  in  inter- 
state commerce. 

In  the  earlier  cases  however,  before  the  position  of  the 
Supreme  Court  in  regard  to  the  national  control  over  com- 
merce was  distinctly  declared,  both  provisions  of  the  Con- 
stitution were  invoked,  and  in  some  cases  the  judges  of  the 
Supreme  Court  have  themselves  differed  in  the  grounds  of 
their  opinion  as  to  the  invaliditj^  of  such  legislation,  some 
assigning  as  a  reason  the  violation  of  the  privileges  and 
immunities  of  citizens  of  other  States  and  others  the  inter- 
ference with  commerce.  1 

Later  decisions  of  the  court  however  have  declared  all 
such  discriminations  void  on  the  ground  of  interfering  with 
commerce. 


§  132.  Discrimination    against    non-residents    an   inter- 
ference with  commerce. 

This   was  decided   in  the   case  of  Ward  v.  Maryland. ^ 
The  statute  required  all  traders  resident  in  the    State  to 

1  Crandall  v.  Nevada,  6  Wall.  35,  supra,  §  20 ;  Ward  v.  Maryland,  12  Wall. 
419.  Thus  Justice  Miller,  who  delivered  the  opinion  of  the  court  ia 
Crandall  u.  Nevada,  decided  in  1867,  in  holding  a  State  tax  on  passengers 
passifag  through  the  State  invalid,  placed  his  decision  on  the  ground  that 
the  tax  was  inconsistent  with  the  relations  of  the  State  to  the  Federal 
Government,  see  stipra,  and  doubted  whether  it  could  be  avoided  under 
the  commerce  clause;  Justice  Clifford  and  Chief  Justice  Chase  based 
their  opinion  distinctly  upon  its  being  void  under  the  commerce  clause. 
In  his  lectures  however  delivered  in  1889,  Justice  Miller  speaks  of  the 
case  as  illustrative  of  the  national  regulation  of  commerce.  See  Miller 
on  Const.,  p.  453. 

2  12  Wallace,  419,  reversing  Ward  v.  State,  31  Md.  279. 


140  INTERFEREXCE    WITH    INTERSTATE    COMMERCE.     §    132 

take  out  licenses,  varying  from  $12  to  $150,  according  to 
the  value  of  their  stock,  and  required  of  non-residents  an 
annual  license  of  $300.  The  Supreme  Court  held  that  this 
was  void  as  a  violation  of  the  privileges  and  immunities  of 
citizens  of  other  States.  It  declared  that,  if  the  States 
could  impose  discriminating  taxes  against  citizens  of  other 
States,  it  would  soon  be  found  that  the  power  conferred 
upon  Congress  to  regulate  interstate  commerce  was  of 
no  value,  and  that  inequality  of  burden  as  well  as  the  want 
of  uniformity  in  commercial  regulations  was  one  of  the 
grievances  of  citizens  under  the  Confederation,  which  the 
new  Constitution  was  adopted  to  remedy.^  The  rule,  that 
anv  form  of  discrimination  in  taxation  against  non- 
residents is  invalid  has  been  enforced  in  many  State 
cases. 

In  Walling  v.  Michigan,^  this  principle  was  applied  to  a 
statute  of  Michigan  imposing  a  tax  upon  persons,  who,  not 
residino-  or  having  their  principal  place  of  business  in  the 
State,  engaged  there  in  the  business  of  selling  or  sohciting 
the  sale  of  liquors  to  be  shipped  into  the  State.  The 
court  held  that  such  an  act  was  necessarily  a  discrimina- 
tion in  favor  of  the  products  of  the  State,  and  was  thus  a 
reo-ulation  and  restraint  of  commerce;  and  it  was  none 
the  less  a  discrimination  though  the  subsequent  act  imposed 
a  greater  tax  upon  all  persons  in  the  State  engaged  in 
manufacturing  or  selling  liquors  to  be  shipped  outside  of 
its  confines.  The  subsequent  act  imposed  a  tax  on  domes- 
tic dealers  but  not  on  their  drummers,  while  the  tax  on 
drummers  and  agents  of  non-residents  remained,  and  this 
operated  as  a  discrimination. 

1  Justice  Bradley  concurred  in  this  case,  on  the  ground  that  the  act 
was  violative  of  the  national  control  over  commerce,  and  that  it  would 
be  violative,  even  if  the  same  burden  was  put  upon  non-residents  for 
selling  goods  as  upon  residents. 

2  116  U.S.  446. 


^   133    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  141 

§  133.   Discriminating    taxation     condemned    in     State 
courts. 

The  same  principle,  that  there  must  be  no  discrimina- 
tion in  taxation  in  favor  of  residents,  since  the  decision  in 
Ward  V.  Maryland  has  been  recognized  and  applied  in 
numerous  decisions  of  the  State  courts.  Thus  statutes 
demanding  licenses  from  non-resident  peddlers,  while 
exempting  from  the  saine  requirement  manufacturers, 
farmers  and  mechanics  residing  in  the  State,  have  been 
held  void.^ 

In  Pennsylvania,  a  borough  ordinance  was  void,  which  dis- 
criminated against  non-residents,  by  prohibiting  them  from 
peddling  or  selling  goods  from  house  to  house  without 
license,  and  fixed  the  fee  at  so  high  a  figure  as  to  amount 
to  a  prohibition,  while  it  excepted  residents  of  the  borough 
from  its  operation. ^ 

A  New  Hampshire  statute  provided  that  the  court  could 
grant  peddlers'  licenses,  on  proper  application,  to  residents. 
The  court  held  that  the  restriction  was  invalid  under  the 
Federal  guaranty  of  equal  privileges,  and  granted  a  license 
to  a  non-resident  notwithstanding  the  restriction  in  the 
statute.^ 

An  act  authorizing  the  city  of  Philadelphia  to  require  a 
license,  except  from  Pennsylvania  farmers  peddling  the 
products  of  their  farms  in  the  city ;  *  and  a  similar  ordi- 
nance of  the  city  of  Buffalo  relating  to  the  sale  of  farm 
products,  and  excepting  retail  sales  by  residents  of  the 
State  and  owners  or  lessees  of  lands  within  the  State,  and 

1  Commonwealth  v.  Myer,  92  Va.  809;  Rogers  v.  Kent  Circuit 
Judge,  115  Mich.  44i;  See  also  Albertson  v.  Wallace,  81  N.  C.  479; 
Sinclair  V.  State,  69  N,  C.  47. 

2  Sayre  Borough  v.  Phillips,  148  Pa.  482.  See  Radebaugh  v.  Village  of 
Plain  City,  28  Weelily  Law  Bui.  107;  Ex  parte  Thornton^  12  Fed.  Rep. 
638. 

3  In  re  Bliss,  63  N.  H.  135. 

4  Coe  V.  Simmons,  3  Pa.  Dist.  Ct.  792. 


142  INTERFERENCE    WITH    INTERSTATE    COMMERCE.      §    135 

sales  of  products  grown  by  the  sellers  on  theii-  own  lands, 
were  held  discriminating  and  void.^ 

A  license  fee  exacted  from  peddlers,  except  those  deal- 
ing exclusively  with  merchants  of  the  coiinty,  merchants 
residing  and  having  a  regular  place  of  business  therein  and 
citizens  of  the  county  selling  wares  of  their  own  growth 
and  manufacture,  was  held  void.^ 

§  134.  Discriminatioii  against  products  of  another  State 
invalid. 

The  leading  authority  on  this  subject  is  the  decision  of  the 
Supreme  Court  in  Welton  v.  Missouri,^  decided  in  1875,  re- 
versing the  Supreme  Couit  of  Missouri  and  holding  void  a 
statute  of  that  State  which,  from  the  requirement  of  a  license 
from  peddlers,  excepted  goods  which  were  the  growth,  pro- 
duce or  manufacture  of  the  State.  The  State  court  had  held 
that  this  was  valid  as  a  police,  regulation.  But  the  Supreme 
Court  said  that  the  statute  infringed  the  power  of  Congress 
to  regulate  commerce,  which  includes  the  power  to  deter- 
mine how  far  commerce  shall  be  free  and  untrammeled. 
In  this  case  the  court  announced  distinctly  the  doctrine, 
that  that  portion  of  commerce  with  foreign  nations  and 
between  the  States,  which  consists  in  the  transportation  and 
exchange  of  commodities,  is  of  national  importance  and 
admits  and  requh-es  uniformity  of  regulation. 

§  135.  Supreme  Court  in  Welton  v.  Missouri. 

It  said,  at  page  280 :  "The  very  object  of  investing  this 
power  in  the  general  government  was  to  insure  this 
uniformity  against   discriminating    State  legislation.     The 

1  City  of  Buffalo  v.  Reavey,  55  N.  Y.  S.  792;  see  also  Fecheimer  v.  City 
of  Louisville,  8i  Ky.  306 . 

2  Commonwealth  u.  Snyder,  182  Pa.  St.  630.  • 

3  91  U.  S.  275,  reversing  Missouri  v.  Welton,  55  Mo.  288. 


§   135    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  143 

depressed  condition  of  commerce  and  the  obstacles  to  its 
growth  previous  to  the  adoption  of  the  Constitution,  from 
the  want  of  some  single  controlling  authority,  has  been 
frequently  referred  to  by  this  court  in  commenting  upon 
the  power  in  question."  There  is  a  difficulty,  the  opinion 
continued,  in  all  cases  of  this  character,  in  drawino-  the  line 
precisely  where  the  commercial  power  of  Congress  ends 
and  the  power  of  the  State  begins,  and  a  similar  difficulty 
was  found  in  Brown  v.  Maryland  in  drawing  the  line  of 
distinction  between  restrictions  upon  the  power  of  the 
States  to  lay  duties  on  imports,  and  their  acknowledo-ed 
power  to  tax  persons  and  property.  The  court  added,  at 
page  282  :— 

<' Following  the  guarded  language  of  the  court  in  that 
case,  we  observe  here,  as  was  observed  there,  that  it  would 
be  premature  to  state  any  rule  which  would  be  universal  in 
its  application  to  determine  when  the  commercial  power  of 
the  Federal  government  over  a  commodity  has  ceased,  and 
the  power  of  the  State  has  commenced.  It  is  sufficient  to 
hold  now  that  the  commercial  power  continues  until  the 
commodity  has  ceased  to  be  the  subject  of  discriminating 
legislation  by  reason  of  its  foreign  character.  That  power 
protects  it,  even  after  it  has  entered  the  State,  from  any 
burdens  imposed  by  reason  of  its  foreign  origin.  The  act 
of  Missouri  encroaches  upon  this  power  in  this  respect,  and 
is  therefore,  in  our  judgment,  unconstitutional  and  void."  ^ 

This  principle  has  been  frequently  enforced.  Thus  a 
statute  of  Virginia  discriminating,  against  manufacturers  of 

^  The  Supreme  Court  of  Missouri,  in  a  decision  of  an  earlier  date 
however  was  among  the  first,  if  it  was  not  the  first,  of  the  State  courts 
to  condemn  discriminations  of  this  character  in  taxation.  Thus  in 
State  V.  North,  27  Mo.  464,  in  an  opinion  by  Judge  Scott,  notable  from 
the  fact  that  it  was  pronounced  shortly  before  the  outbreak  of  the  Civil 
War,  when  sectional  feeling  ran  high  in  Missouri,  it  was  said,  1.  c.  p. 
482:  "  Nothing  is  to  be  gained  by  the  exercise  of  the  power  of  laying 
a  discriminating  tax.  If  it  is  lawful  for  one  State  to  do  it,  it  is  equally 
so  to  the  others.    Laws  will  be  passed  in  retaliatioa  of  those  we  may 


144  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    135 

other  States,  by  requiring  a  license  from  their  agents  and 
not  from  the  agents  of  its  own  manufacturers,  was  held 
invalid.^     The  court  said  at  page  350:  — 

"  Sales  by  manufacturers  are  chiefly  effected  through 
agents.  A  tax  upon  their  agents  when  thus  engaged  is, 
therefore,  a  tax  upon  them,  and  if  this  is  made  to  depend 
upon  the  foreign  character  of  the  articles,  that  is,  of  theu' 
having  been  manufactured  without  the  State,  it  is  to  that 
extent  a  regulation  of  commerce  in  the  articles  between 
the  States.  It  matters  not  whether  the  tax  be  laid  directly 
upon  the  articles  sold  or  in  the  form  of  licenses  for 
their  sale.  If  by  reason  of  their  foreign  character  a  State 
can  impose  a  tax  upon  them,  or  upon  the  person  through 
whom  the  sales  are  effected,  the  amount  of  the  tax  will  be 
a  matter  resting  in  her  discretion.  She  may  place  the  tax 
at  so  high  a  figure  as  to  exclude  the  introduction  of  the 
foreign  article  and  prevent  competition  with  the  home 
product."  2 

enact,  and  so  we  may  be  losers  in  the  end.  Situated  as  ttie  State  of 
Missouri  is,  she  should  be  one  of  the  last  to  enter  on  such  a  course  of 
legislation.  Without  a  seaboard,  far  in  the  interior,  cut  off  from  all 
outlet  to  foreign  commerce,  she  would  be  one  of  the  greatest  sufferers 
in  a  contest  of  such  a  nature.  If  we  have  erred  in  applying  to  the  law 
under  consideration  the  principle  that  a  tax  discriminating  between  for- 
eign and  domestic  articles  caonot  be  imposed,  we  feel  confident,  never- 
theless, that  the  principle  is  a  correct  one.  No  one  can  rise  from 
reading  the  history  of  events  out  of  which  our  present  constitution  had 
its  existence,  without  a  conviction  that  the  power  of  laying  a  discrimi- 
nating tax  on  the  importations  from  other  States  and  nations  was  never 
designed  to  be  left  with  the  several  States.  That  is  a  power  only  to  be 
exercised  by  a  single  body,  and  that  body  has  been  created  with  ample 
power  for  the  protection  of  the  interests  of  all  the  States."  This  case 
was  cited  by  the  Supreme  Court  in  Ward  v.  Md.,  supra,  §  132. 

1  Webber  v.  Virginia,  103  U.  S.  SU 

2  For  decisions  in  State  courts  holding  discriminations  in  peddlers' 
licenses  against  goods  manufactured  in  other  States  to  be  void,  follow- 
ing Welton  V.  Missouri,  see  Vines  v.  State,  67  Ala.  73  ;  Ex  parte  Thomas, 
71  Cal.  204;  State  v.  Furbusb,  72  Me.  493;  State  v.  McGinnis,  37  Ark. 
362;  Sayre  Borough  v.  Phillips,  148  Pa.  482;  Georgia  Pkg.  Co.  v.  Macon, 


§    137    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  145 

§  136.  What  constitutes  discrimination. 

Discrimination  may  consist  not  only  in  a  different  rate 
of  taxation  or  license  as  between  domestic  o-oods  and  soods 
from  other  States,  but  also  in  the  requirement  of  a  license 
for  selling  those  which  are  foreign  made  when  none  is 
required  for  selling  domestic  goods,  as  in  the  cases  cited, 
or  also  a  license  may  be  granted  only  in  the  case  of 
domestic  goods  or  residents.^  Freedom  of  commerce  under 
the  guaranty  of  the  Constitution  requires  equality,  of  right 
and  the  absence  of  all  discrimination.  Thus,  in  a  Pennsyl- 
vania case,^  an  ordinance  requiring  peddlers  and  canvassers 
to  take  out  licenses  was  held  invalid,  notwithstanding  a 
proviso  that  it  should  not  apply  to  persons  soliciting  orders 
for  goods  manufactured  outside  the  State.  The  court  said 
there  were  many  articles  of  interstate  commerce,  such  as 
the  products  of  the  soil,  besides  manufactured  goods.  But 
a  requirement  of  all  persons,  without  discrimination,  who 
desire  to' peddle  a  certain  commodity,  that  they  must  make 
proof  of  good  moral  character  before  they  can  obtain  a 
license,  is  a  proper  regulation,  and  not  in  violation  of  the 
interstate  commerce  clause.^ 

§  137.  Discrimination  must    relate    to    interstate    com- 
merce. 

Thus  a  city  ordinance  imposing  a  license  tax  upon  beer 
not  made  in  the  city  but  brought  there  for  sale  was  held 

60  Fed.  R.  774;  Ames  v.  People,  25  Colo.  508.  But  held  in  States. 
Stevenson,  109  N.  C.  730,  that  the  exception  of  "farm  products  pur- 
chased from  the  producer"  from  the  return  required  to  be  made  by 
merchants  and  other  dealers  as  the  basis  for  a  license  tax  is  not  a  dis- 
crimination against  the  products  of  citizens  of  other  States. 

1  See  In  re  Bliss,  63  N.  H.  135,  supra,  §  133. 

2  Port  Clinton  Borough  v.  Shafer,  5  Pa.  Dist.  Ct.  583. 

3  Commonwealth  v.  Harmel,  166  Pa.  89.  An  illustrative  discrimina- 
tion was  held  invalid  in  Iowa,  where  a  city  ordinance  required  a  license 
from  peddlers,  except  where  they  resided,  and  the  goods  were  manu- 
factured, in  Marshall  County.     Marshalltown  v.  Blum,  58  Iowa,  184. 

10 


146  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    138 

by  the  Supreme  Court  not  open  to  objection,  so  far  as  it 
operated  upon  the  business  of  the  plaintiff  in  error,  either 
under  the  commerce  chiuse  or  as  a  violation  of  the  privi- 
leges and  immunities  of  citizens,  because  it  did  not  appear 
that  plaintiff's  beer  was  not  manufactured  in  the  State  of 
Viro-inia  and  for  aught  that  appeared  in  the  case  it  might 
have  been  manufactured  in  other  parts  of  that  State.  In 
order  to  raise  a  Federal  question  on  either  ground,  it  must 
be  shown  that  the  manufacturer  is  in  another  State  or  in 
a  foreign  country.  The  writ  of  error  therefore  was  dis- 
missed. ^ 

§  138.  Taxation    of    commercial     travelers    from    other 
States  invalid. 

The  decisions  of  the  Supreme  Court  denying  the  right 
to  discriminate  against  either  persons  or  products  of  other 
States  were  in  accord  with  the  prevailing  judicial  opinion 
in  the  State  courts.  But  very  many  of  the  States  had 
enacted  statutes  requiring  licenses  from  commercial  travel- 
ers, sometimes  on  behalf  of  both  the  State  and  those  of  its 
municipalities,  which  such  commercial  travelers  visited.  It 
was  held  by  the  State  courts  that  such  statutes,  when  free 
from  discrimination  either  against  the  person  employing 
the  drummers  or  the  States  wherein  the  goods  sold  by  them 
were  produced,  were  not  open  to  the  constitutional  objection 
of  interfering  with  interstate  commerce.  These  statutes 
however  were  nullified  and  these  decisions  overruled  by 
the  decision  of  the  Supreme  Court  in  Eobbins  v.  Shelby 
County  Taxing  District,  decided  in  1886,^  which  laid  down 
the  definite  rule  ever  since  consistently  adhered  to  in  the 
court,  that  while  the  State  can  tax  property  from  other 
States  as  part  of  the  general  property  within  its  jurisdic- 

1  Downham  v.  Alexandria  (Va.),  10  "Wall.  173. 

2  120  U.  S.  489. 


§  139    INTERFERENCE   WITH   INTERSTATE    COMMERCE.  147 

tion,  whether  in  the  original  packages  or  not,  it  cannot  tax 
the  business  of  importing  from  other  States ;  and,  as  the 
right  to  bring  goods  from  other  States  includes  the  right  to 
sell  them  and  to  solicit  sales,  therefore  the  State  cannot  tax 
either  the  right  to  sell  or  the  right  to  solicit  sales,  whether 
in  the  form  of  a  license  charge  or  otherwise. 


§  139.  Supreme  Court  in  Robbins  v.  Shelby  County  Tax- 
ing" District. 

Robbins,  a  commercial  traveler  for  a  Cincinnati  firm,  for 
refusing  to  pay  the  license  required  from  all  drummers  and 
all  persons  not  having  a  licensed  house  of  business  in  the 
taxing  district,  who  should  sell  or  offer  to  sell  goods,  wares 
or  merchandise  by  sample,  was  found  guilty  of  a  misde- 
meanor, and  the  conviction  was  sustained  by  the  State 
court.  But  the  Supreme  Court  held  that  the  statute  was 
invalid  as  an  attempted  regulation  of  commerce,  and  said, 
by  Justice  Bradley,  1.  c.  page  494 :  — 

"  In  a  word,  it  may  be  said,  that  in  the  matter  of  inter- 
state commerce  the  United  States  are  but  one  country,  and 
are  and  must  be  subject  to  one  system  of  regulations,  and 
not  to  a  multitude  of  systems.  The  doctrine  of  the  free- 
dom of  that  commerce,  except  as  regulated  by  Congress, 
is  so  firmly  established  that  it  is  unnecessary  to  enlarge 
further  upon  the  subject. 

"  In  view  of  these  fundamental  principles,  which  are  to 
govern  our  decision,  we  may  approach  the  question  sub- 
mitted to  us  in  the  present  case,  and  inquire  whether  it  is 
competent  for  a  State  to  levy  a  tax  or  impose  any  other 
restriction  upon  the  citizens  or  inhabitants  of  other  States, 
for  selling  or  seeking  to  sell  their  goods  in  siich  State 
before  they  are  introduced  therein.  Do  not  such  restric- 
tions affect  the  very  foundations  of  interstate  trade?  How 
is  a  manufacturer,  or  a  merchant  of  one  State,  to  sell  his 


148  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    139 

goods  in  another  State,  without,  in  some  way,  obtaining 
orders  therefor?  Must  he  be  compelled  to  send  them  at 
a  venture,  without  knowing  whether  there  is  any  demand 
for  them?  This  may,  undoubtedly,  be  safely  done  in 
regard  to  some  products  for  which  there  is  always  a 
market  and  a  demand,  or  where  the  course  of  trade  has 
established  a  general  and  unlimited  demand.  A  raiser 
of  farm  produce  in  New  Jersey  or  Connecticut,  or  a 
manufacturer  of  leather  or  wooden  ware,  may,  perhaps, 
safely  take  his  goods  to  the  city  of  New  York  and  be 
sure  of  finding  a  stable  and  reliable  market  for  them. 
But  there  are  hundreds,  perhaps  thousands,  of  articles 
which  no  person  would  think  of  exporting  to  another  State 
without  first  procuring  an  order  for  them."  *  *  * 
*'The  truth  is,  that,  in  numberless  instances,  the  most 
feasible,  if  not  the  only  practicable,  way  for  the  merchant 
or  manufacturer  to  obtain  orders  in  other  States  is  to  obtain 
them  by  personal  application,  either  by  himself,  or  by  some 
one  employed  by  him  for  that  purpose;  and  in  many 
branches  of  business  he  must  necessarily  exhibit  samples 
for  the  purpose  of  determining  the  kind  and  quality  of  the 
goods  he  proposes  to  sell,  or  which  the  other  party  desires 
to  purchase.  But  the  right  of  taxation,  if  it  exists  at  all, 
is  not  confined  to  selling  by  sample.  It  embraces  every 
act  of  sale  whether  by  word  of  mouth  only,  or  by  the 
exhibition  of  samples.  K  the  right  exists,  any  New  York 
or  Chicago  merchant  visiting  New  Orleans  or  Jacksonville, 
for  pleasure  or  for  his  health,  and  casually  taking  an  order 
for  goods  to  be  sent  from  his  warehouse,  could  be  made 
liable  to  pay  a  tax  for  so  doing,  or  be  convicted  of  a  misde- 
meanor for  not  having  taken  out  a  license.  The  right  to 
tax  would  apply  equally  as  well  to  the  principal  as  to 
his  agent,  and  to  a  single  act  of  sale  as  to  a  hundred 
acts."     *     *     * 


§    140    INTEEFESENCE    WITH    INTERSTATE    COMMERCE.  149 

§  140.  Interstate  commerce    cannot  be  taxed  at  all. 

After  denying  that  the  exemption  of  interstate  commerce 
would  in  any  perceptible  degree  diminish  the  resources  or 
just  power  of  taxation  of  the  State,  the  court  proceeded 
at  page  497  : — 

*'  It  is  strongly  urged,  as  if  it  were  a  material  point  in  the 
case,  that  no  discrimination  is  made  between  domestic  and 
foreign  drummers  —  those  of  Tennessee  and  those  of  other 
States ;  that  all  are  taxed  alike.  But  that  does  not  meet 
the  difficulty.  Interstate  commerce  cannot  be  taxed  at  all, 
even  though  the  same  amount  o  f  tax  should  be  laid  on 
domestic  commerce,  or  that  which  is  carried  on  solely 
within  the  State.  This  was  decided  in  the  case  of  the 
State  Freight  Tax,  15  Wall.  232.  The  negotiation  of  the 
sale  of  goods  which  are  in  another  State,  for  the  purpose 
of  introducing  them  into  the  State  in  which  the  negotia- 
tion is  made,  is  interstate  commerce.  A  New  Orleans 
merchant  cannot  be  taxed  there  for  ordering  goods  in 
London  or  New  York,  because,  in  the  one  case  it  is 
an  act  of  foreign,  and,  in  the  other,  of  interstate  com- 
merce, both  of  which  are  subject  to  regulation  by  Congress 
alone . ' ' 

The  court  added  that  it  would  not  be  difficult  to  show 
this  tax  to  be  discriminative  against  the  merchants  and 
manufacturers  of  other  States ;  and  that,  if  selling  goods  by 
sample  and  the  employment  of  drummers  injuriously  affected 
the  local  interest,  Congress,  if  applied  to,  would  undoubtedly 
make  such  reasonable  regulations  as  the  case  demanded, 
but  Congress  alone  could  do  so ;  "  for  it  is  obvious  that  such 
regulations  should  be  based  on  a  uniform  sj^stem  applicable 
to  the  whole  countrj^,  nnd  not  left  to  the  varied,  discordant, 
or  retaliatory  enactments  of  forty  different  States.  The 
confusion  into  which  the  commerce  of  the  country  would  be 
thrown  by  being  subject  to  State  legislation  on  this  subject, 


150  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    142 

would  be  but  a  repetition  of  the    disorder   which    prevailed 
under  the  Articles  of  Confederation."  ^ 

§  141.  Robbins  v.  Shelby  Taxing  District  reafflrnied. 

Subseiguently,  in  a  case  from  Texas  also  imposing  a 
tax  upon  commercial  travelers,  the  court  was  asked  to  re- 
consider the  Robbins  case.  It  had  been  contended  by  the 
Texas  court,  in  its  opinion,  that  the  decision  was  contrary  to 
sound  principles  of  constitutional  construction  and  in  con- 
flict with  the  cases  formerly  decided  by  the  Supreme  Court. 
But  the  latter  tribunal  adhered  to  its  ruling,  saying :  ^  — 

' '  Even  if  it  were  true  that  the  decision  referred  to  was 
not  in  harmony  with  some  of  the  previous  decisions,  we  had 
supposed  that  a  later  decision  in  conflict  with  prior  decisions 
had  the  effect  to  overrule  them,  whether  mentioned  and 
commented  on  or  not.  And  as  to  the  constitutional  princi- 
ples involved,  our  views  were  quite  fully  and  carefully,  if  not 
clearly  and  satisfactorily,  expressed  in  the  Robbins  case." 

§  142.  Supreme  Court  in  Brennan  v.  Titusville. 

The  principle  of  the  Robbins  case  was  again  applied 
in  the  case  of  the  agent  of  a  Chicago  manufacturer,  who 

1  Chief  Justice  "Waite  and  Justices  Field  and  Gray  dissented,  saying 
that  they  could  see  no  constitutional  objection  to  such  a  tax;  that  there 
was  no  discrimination  and  citizens  of  other  States  were  taxed  the  same 
as  if  they  were  citizens  of  Tennessee.  The  State  court  had  decided 
that  any  person  who  should  sell  by  sample  should  pay  the  tax,  and  to 
that  they  agreed,  and  that  it  would  be  time  enough  to  consider  whether 
a  non-resident  can  be  taxed  for  merely  soliciting  orders  without  having 
samples,  when  such  a  case  arose.  In  a  later  case,  Corson  v.  Maryland, 
120  U.  S.  502,  these  dissenting  judges  concurred  in  the  decision  on  the 
ground  that  the  statute  required  the  non-resident  merchant  desiring  to 
sell  by  sample  to  pay  for  his  license  a  sum  to  be  ascertained  by  the 
amount  of  his  stocls  in  trade  in  the  State  where  he  resided  and  where  he 
had  his  principal  place  of  business;  that  Is,  the  charge  was  measured 
by  his  capacity  to  do  business  all  over  the  United  States  and  without 
reference  to  the  amount  of  the  business  done  in  Maryland. 

2  Asher  v.  Texas,  128  U.  S.  129. 


§    142    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  151 

traveled  and  solicited  orders  for  picture  frames,  exMbitino- 
samples.  He  was  convicted  under  an  ordinance  of  the  city  of 
Titusville,  Pennsylvania,  for  violating  the  city  ordinance  re- 
quiring a  license  from  all  persons  canvassing  and  solicitino- 
orders  for  goods,  wares  and  merchandise.  The  Supreme 
Court  of  Pennsylvania  sustained  the  tax,  but  was  reversed 
by  the  Supreme  Court  of  the  United  States.  The  latter 
court  said  it  was  immaterial  that  the  tax  was  only  required 
for  selling  to  persons  other  than  manufacturers  and  licensed 
merchants,  because,  if  the  State  could  tax  for  the  privilege 
of  selling  to  one  class,  it  could  for  selling  to  another  or  to 
all.  In  either  case  it  was  a  restriction  on  the  right  to  sell 
and  on  lawful  commerce  between  the  citizens  of  two  States. 
The  court  was  not  precluded  by  the  opinion  of  the  Supreme 
Court  of  Pennsylvania,  that  the  ordinance  was  enacted  in 
the  exercise  of  the  police  power. ^ 

In  this  case    the    court   distinguished   Ficklen  v.  Shelby  . 
County,  infra,  §  143,  saying,  1.  c.  p.  308:  — 

"We  only  refer  thus  at  length  to  that  case  to  show  the 
distinction  between  it  and  this  case,  and  to  notice  that  in 
the  opinion  was  reaffirmed  the  proposition  that  no  State 
can  levy  a  tax  on  interstate  commerce  in  any  form,  whether 
by  way  of  duties  laid  on  the  transportation  of  the  subjects 
of  that  commerce,  or  on  the  receipts  derived  from  that 
transportation,  or  on  the  occupation  or  business  of  carrvinff 
iton."2  ^ 

1  Brennan  v.  Titusville,  153  U.  S.  289. 

2  The  effect  of  the  decision  in  Bobbins  v.  Shelby  Taxing  District, 
was  to  nullify  the  laws  requiring  licenses  from  drummers  in  a  number  of 
States.  The  decision  was  followed  in  the  following  State  and  United  States 
Circuit  Courts:  Alabama:  State  v.  Agee,  83  Ala.  110;  Ex  parte  Murray, 
93  Ala.  78;  Arkansas:  In  re  Rozelle,  57  Fed.  Rep.  155;  District  of  Colum- 
bia: In  re  Hennick, 5  Mackey,  489;  Georgia:  Wrought  Iron  Range  Co.  v. 
Johnson,  84  Ga.  754,  the  Georgia  Supreme  Court  saying:  «<  After  the 
State  has  yielded  to  the  Federal  army,  it  can  very  well  afford  to  yield  to 
the  Federal  judiciary;"  /Hinois;   City  of  Bloomington  ».   Bourland,  137 


152  INTERFEKENCE    WITH    INTERSTATE    COMMERCE.     §    143 

§  143.  Taxation  of  commercial  brokers. 

The  taxing  power  of  the  State  over  persons  and  sub- 
jects within  its  jurisdiction  is  not  limited,  except  where 
it  involves  necessarily  and  directly  the  taxation  of  interstate 
commerce,  that  is,  taxation  of  sales  or  soliciting  sales,  on 
behalf  of  a  non-resident  principal. 

Thus  in  another  Tennessee  case,i  the  tax  was  levied  upon 
commission  merchants,  who  were  known  as  commercial 
agents  and  merchandise  brokers.  They  had  no  capital  in 
their  business  and  so,  in  accordance  with  the  State  statutes, 
took  out  a  license  for  one  year  authorizing  them  to  do  any 
and  all  kinds  of  commission  business.  The  tax  v»^as  im- 
posed on  the  gross  yearly  commissions  during  the  year  for 
which  they  were  thus  licensed.  It  happened  that  during 
the  year  1887  all  the  sales  negotiated  by  one  of  the  parties, 
and  most  of  those  made  by  the  other,  were  for  non-resident 
■principals.  But  it  seems  that  their  business  was  not  con- 
fined to  transactions  for  non-residents.  A  renewal  of  their 
licenses  having  been  applied  for,  the  application  was  denied 
because  they  made  no  return  of  sales  and  no  payment  of 
percentage  on  their  commissions  received.  Thereupon  a 
bill  was  filed  to  restrain  any  interference  with  their  current 
business.     The  court  affirmed  the  judgment  of  the  Supreme 

111.  534;  Indiana:  M.irtin  v.  Kosedale,  130  Ind.  108;  Kansas:  Ft.  Scott  u. 
Pelton,  39  Ivius.  764;  Louisiana:  Simmons  Hardware  Co.  v.  Maguire, 
Sheriff,  39  La.  Ann.  848;  Michigan:  People  v.  Bunker,  87  N.  W.  Rep.  90; 
Minnesota:  In  re  Kiinrai-l,  41  Fi^d.  Rep.  775;  Mississippi:  Overton  v. 
Viclibbiirg,  70  Miss.  558;  Nevada:  Ex  parte  Rosenblatt,  19  Nev.  439; 
Aorih  Cariilina:  Ex  parte  Ht)Ugh,  69  Fed.  Rep.  330;  also  State  v.  Bracco, 
103  N.  C.  349;  Oklahoma:  Baxter  v.  Thomas,  4  Okla.  605;  Pennsylvania : 
Inre  White,  43  Fed.  R.  p.  913;  In  re  Nichols,  48  Fed.  R.-p.  164;  In  re 
Tyeiman,  48  Fed.  Rep.  167;  Texas:  Ex  parte  Stockton,  33  Fed.  Rep.  95; 
Talbutt  V.  State,  39  Tex.  Crim.  Rep.  64;  Virginia:  Adkins  v.  Richmond, 
98  Va.  91,  and  47  L.  R.  A.  583.  In  Texas  the  State  court  at  first 
declined  to  follow  the  Robbins  case,  see  In  re  Asher,  23  Tex.  App. 
662,  reversed  in  128  U-  S.  129,  supra,  §  141. 

1  Fickleuv.  Shelbj^  County  Taxing  District,  145  U.  S.  1. 


§   144    INTERFERENCE   WITH   INTERSTATE    COMMERCE.  153 

Court  of  Tennessee  denying  the  injunction,  sajdng  that 
the  tax  was  not  on  the  goods,  nor  on  the  proceeds  of  the 
goods,  nor  was  it  a  tax  on  non-resident  merchants,  and  that 
if  it  affected  interstate  commerce  in  any  way,  it  was  inci- 
dentally and  so  remotely  as  not  to  be  a  regulation  of  such 
commerce.^ 

§  144.   Supreme  Court  in  Ficklen   v.  Shelby  County  Tax- 
ing District. 

"  No  doubt  can  be  entertained,"  said  C.  J.  Fuller,  who 
delivered  the  opinion,  at  page  21,  "  of  the  right  of  a  State 
legislature  to  tax  trades,  professions  and  occupations,  in 
the  absence  of  inhibition  in  the  State  constitution  in  that 
regard;  and  where  a  resident  citizen  engages  in  general 
business  subject  to  a  particular  tax  the  fact  that  the  busi- 
ness done  chances  to  consist,  for  the  time  being,  wholly  or 
partially  in  negotiating  sales  between  resident  and  non- 
resident merchants,  of  goods  situated  in  another  State,  does 
not  necessarily  involve  the  taxation  of  interstate  commerce, 
forbidden  by  the  Constitution."     *     *     * 

And  he  concluded  as  follows,  p.  24 :  — 

"  We  agree  with  the  Supreme  Court  of  the  State  tliat 
the  complainants  have  taken  out  licenses  under  the  law  in 
question  to  do  a  general  commission  business,  and  having 
given  bond  to  report  their  commissions  during  the  year,  and 
to  pay  the  required  percentage  thereon,  could  not,  when 
they  applied  for  similar  licenses  for  the  ensuing  year, 
resort    to   the    courts   because  the    municipal    authorities 

1  See  also  State  v.  Wagener,  77  Minn.  483,  where  a  statute  requiring 
commission  merchants  selling  agricultural  produce  on  commission  to 
take  out  a  license  and  give  bond  for  benefit  of  consignors  was  sustained, 
the  court  saying  that  the  statute  was  obviously  not  intended  to  raise 
revenue,  but  to  protect  consignors  of  wheat  and  perishable  farm  pro- 
duce from  frauds  so  frequently  practiced  upon  them.  It  was  therefore 
an  ordinary  police  regulation.     See  infra,  §  153. 


154  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    144 

refused  to  issue  such  licenses  without  the  payment  of  the 
stipulated  tax.  What  position  they  would  have  occupied 
if  they  had  not  undertaken  to  do  a  general  commission 
business,  and  had  taken  out  no  licenses  therefor,  but  had 
simply  transacted  business  for  non-resident  principals,  is  an 
entirely  different  question,  which  does  not  arise  upon  this 
record." 

Justice  Harlan  dissented,  concluding  as  follows,  p.  28:  — 
"  The  result  of  the  present  decision  is  that  while,  under 
Bobbins  v.  Shelby  Countj'^  Taxing  District,  a  license  tax 
may  not  be  imposed  in  Tennessee  upon  drummers  for 
soliciting  there  the  sale  of  goods  to  be  brought  from  other 
States;  while,  under  Leloup  v.  Mobile,  a  local  license  tax 
cannot  be  imposed  in  respect  to  telegrams  between  points  in 
different  States ;  and  while,  under  Stoutenburgh  v.  Hen- 
nick,  commercial  agents  cannot  be  taxed  in  the  District  of 
Columbia  for  soliciting  there  the  sale  of  goods  to  be  brought 
into  the  District  from  one  of  the  States, — the  Taxing 
District  of  Shelby  County  may  require,  as  a  condition  of 
granting  a  license  as  merchandise  broker,  that  the  applicant 
shall  pay  a  license  fee  and,  in  addition,  2^  per  cent  upon 
the  gross  commissions  received,  not  only  in  the  business 
transacted  by  him  that  is  wholly  domestic,  but  in  that 
which  is  wholly  interstate." 

It  seems  that  in  this  case  the  complainants  held  them- 
selves out  as  prepared  to  transact  business  upon  commission 
for  whoever  employed  them,  whether  resident  or  non-resi- 
dent, and  their  claim  of  exemption  rested  upon  the  single 
fact  that  during  that  year  their  principals  were  non-resi- 
dents. The  case  was  distinsjuished  from  the  Bobbins  case 
on  the  ground  that  there  the  tax  was  not  upon  Bobbins, 
but  upon  the  non-residents  who  employed  him,  while  here 
the  tax  was  upon  the  merchandise  brokers  themselves  in 
respect  to  the  general  commission  business  which  they 
conducted. 


§   145    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  155 

It  will  be  noted  that  in  Brennan  v.  Titusville,  above 
referred  to,  the  court  referred  to  this  case  and  said  that  it 
was  no  dej)arture  from  the  rule  so  firmly  established  by  the 
prior  decisions,  at  page  308 :  "At  least,  no  departure  was 
intended,  though,  as  shown  b}^  the  division  in  the  court, 
and  by  the  dissenting  opinion  of  Mr.  Justice  Harlan,  the 
case  was  near  the  boundary  line  of  the  State's  power.  In 
that  case  the  plaintiffs  were  in  a  general  commission  busi- 
ness, not  acting  for  any  particular  firm  within  or  without 
the  State." 

§  145.   Stockard  v.  Morgan  on  commercial  brokers. 

In  a  very  recent  case,  also  from  Tennessee,  the  Su- 
preme Court  reversed  the  judgment  of  the  Supreme  Court 
of  that  State,  and  held  that  parties  who  do  business  only 
for  non-residents,  that  is,  whose  business  is  exclusively 
confined  to  soliciting  orders  from  jobbers  and  wholesale 
dealers  in  the  State  as  agents  for  non-resident  parties, 
firms  or  corporations,  are  not  subject  to  a  privilege  tax  for 
conducting  such  business. ^  The  fact  that  a  broker,  as 
«uch,  can  transact  a  local  business  as  well  as  a  business  for 
non-residents,  does  not  determine  the  matter,  and,  if  he 
confines  himself  to  interstate  business,  he  can  do  so  without 
becoming  liable  to  the  tax.^     The  court  said  at  page  580 :  — 

"  Although  it  is  said  in  the  opinion  of  the  State  court 
herein  that  the  thing  taxed  is  the  occupation  of  merchan- 
diise  brokerage,  and  not  the  business  of  those  employing 
the  brokers,  yet  we  have  seen  from  the  cases  already  cited 
that  when  the  tax  is  applied  to  an  individual  within  the 
State  selling  the  goods  of  his  principal  who  is  a  non-resi- 
dent  of  the    State,    it   is  in  effect  a   tax  upon  interstate 


1  Stockard  v.  Morgan,  185  U.  S.  27;  decided  April  7,  1902. 

2  Following  and  quoting  from  Stratford    v.   Montgomery,   110  Ala. 
619. 


156         INTERFERENCE   WITH   INTERSTATE   COMMERCE.     §    146 

commerce,  and  that  fact  is  not  in  any  wise  altered  by 
calling  the  tax  one  upon  the  occupation  of  the  individual 
residing  within  the  State  while  acting  as  the  agent  of  a 
non-resident  principal.  The  tax  remains  one  upon  inter- 
state commerce,  under  whatever  name  it  may  be  desig- 
nated." 

It  therefore  is  established  by  this  latest  judgment  of  the 
court  that  commercial  agents  or  brokers  who  transact  busi- 
ness exclusively  for  non-residents,  in  soliciting  purchases 
or  sales,  are  not  subject  to  a  privilege  or  occupation  tax  for 
so  doing. 

§  146.  The  form  of  commercial  agency  immaterial. 

It  is  immaterial  therefore  whether  the  agency  in  con- 
ducting interstate  commerce  is  that  of  a  drummer  solicit- 
ing sales,  or  of  a  commercial  broker  negotiating  purchases. 
The  essential  fact  is  that  it  is  interstate  commerce,  that  is, 
the  sale  of  property  out  of  the  State  to  a  resident  of  the 
State,  or  of  property  in  the  State  to  a  non-resident.  It  is 
immaterial  whether  the  agent  is  a  commercial  traveler,  or 
has  an  office  as  a  commercial  broker.  He  may  neither 
travel  nor  have  an  office,  but  have  a  room  at  his  hotel,  or 
at  his  lodgings,  in  which  he  exhibits  his  samples  or  nego- 
tiates purchases.  In  the  case  of  brokerage  however  it 
seems  that  exemption  from  taxation  may  be  claimed  only 
when  the  business  is  exclusively  for  non-residents. ^ 

Delivery  is  essential  to  a  sale.  The  agent  delivering  goods 
sold  by  a  drummer  or  commercial  traveler  is  therefore  also 
exempt  from  State  taxation.  Thus  the  salaried  distribut- 
ing agent  for  a  publishing  firm  of  another  State  is  entitled 
to  distribute  the  books  sold  through  another  salaried  agent, 

1  See  cases  supra,  §  143  e«  seq.,  and  Walton  v.  Augusta,  104  Ga.  757, 
30  S,  E.  Rep.  964,  where  parties  engaged  in  the  commercial  street-brok- 
erage business  were  held  not  exempt  from  a  municipal  tax. 


§   147    INTERFERENCE   WITH   INTERSTATE    COMMERCE.  157 

and  a  license  cannot  be  exacted  without  an  unlawful  inter- 
ference with  interstate  commerce.^  It  is  immaterial  that  the 
goods  are  to  be  sold  on  the  installment  plan.  The  right 
to  sell  implies  the  obligation  and  right  to  deliver. ^ 

§  147.  Only  interstate  commerce  agencies  exempt. 

To  secure  exemption  from  the  taxing  power  of  the  State 
over  persons  and  subjects  within  its  jurisdiction,  it  must 
appear  that  the  business  for  non-residents  is  interstate  com- 
merce. 

While  interstate  commerce  is  more  than  travel,  and  in  its 
broad  sense  includes  intercourse  and  the  means  of  inter- 
course, it  has  been  held  not  to  include  personal  interstate 
contracts,  like  insurance,  but  to  be  limited  to  subjects  of 
trade  and  barter  offered  in  the  market  and  having  an  ex- 
istence and  value  independent  of  the  parties  to  the  contract.^ 

Thus  neither  the  contract  of  fire  insurance,*  nor  of 
marine  insurance,^  nor  of  mutual  life  insurance  ^  consti- 
tute commerce.  The  making  of  such  contracts,  it  was 
said,  is  a  mere  incident  of  commercial  intercourse,  and  not 
commerce  itself. 

This  distinction  was  illustrated  in  two  cases  from  Ten- 
nessee. The  soliciting  of  pictures  to  be  enlarged  outside 
of  the  State  was  held  to  constitute  interstate  commerce,'^ 
because  the  process  of  enlarging  involved  the  making  of  a 
larger  picture  from  the  image  of  a  smaller  one,  and  hence 
there  was  traffic  or  commerce.     But  the  business  of  collect- 


1  Huntington  v.  Maban,  142  Ind.  695. 

2  In  re  Spain,  47  Fed.   Rep.  208.     See  also  Laurens  u.   Elmore,  65 
C.  477j  33  S.  E.  Rep.  560;  Pegues  v.  Ray  (La.),  23  So.  Rep.  904. 

8  Paul  V.  Virginia^  8  Wall.  183. 

■*  Paul  V.  Virginia,  supra. 

fi  Hooper  v.  Califoraia,  155  U.  S.  648. 

«  N.  Y.  Life  Ins.  Co.  v.  Cravens,  178  U.  S.  389. 

'  Tennessee  u.  Scott,  98  Teun.  254,  and  36  L.  R.  A.  461. 


158  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    148 

ing  soiled  linen  in  Tennessee  for  shipment  to  a  Kentucky 
laundry  to  be  washed  and  then  returned  was  not  interstate 
commerce.  1  The  court  said,  in  the  latter  case,  that  there 
was  no  commodity  created  of  which  the  ownership  was 
changed.  It  was  simply  a  personal  contract  having  no 
element  of  a  commercial  transaction. 

On  the  other  hand,  the  selling  of  cloth  by  sample  to  be 
made  up  in  another  State  from  measurements  taken  by  the 
salesman,  and  the  clothing  returned  to  the  purchaser,  was  a 
transaction  of  interstate  commerce.^ 

§  148.  The  sale  of  goods  in  the  State  subject  to  the    tax- 
ing power  of  the  State. 

It  has  been  held  that  the  principle  of  exemption  has  no 
application  when  the  goods  sold  by  the  commercial  traveler 
or  other  solicitor  are  actually  in  the  State  when  sold,  as 
such  a  sale  is  not  a  transaction  in  interstate  commerce. 
Accordingly  when  a  salesman  takes  the  goods  about  with 
him  and  delivers  them  when  sold,  a  license  may  be  required 
from  him.  See  taxation  of  peddlers,  infra,  §  150.^  Thus 
where  a  corporation  of  one  State  sends  its  manufactured 
goods  into  another  in  car  load  lots,  and  causes  the  goods 
to  be  stored  in  a  storehouse,  from  which  its  agents  take 
them  in  small  quantities,  carry  them  about  the  country, 
and  sell  and  deliver  them  to  purchasers,  such  agents  are 
not  engaged  in  interstate  commerce.*  In  other  words, 
when  the  goods  are  sent  into  the  State  unsold  and  are  there 
stored  for  sale,  they  become  part  of  the  general  property 
of  the  State  and  amenable  to  its  laws.^      Thus,  in  the  case 


1  Smith  V.  Jackson,  54  S.  W.  Rep.  981^  and  47  L.  R.  A.  416. 

2  State  V.  Rankin,  76  N.  W.  Rep.  299,  11  So.  Dak.  144. 

3  South  Bend  v.  Martin,  142  Ind.  31;  State  v.  French,  109  N.  C.  722, 

4  American  Harrow  Co.  v.  Shaffer,  68  Fed.  Rep.  750.  ' 
fi  Hynes  «.  Briggs,   41  Fed.    Rep.  468;  Singer    Mfg.  Co.   v.  Wright, 

97  Ga.  114,  35  L.  R.  A.  497. 


§    148    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  159 

last  cited,  it  was  said  by  the  court,  Caldwell,  J.,  that  while 
the  State  could  not  license  the  selling  by  sample  of  goods 
which  were  not  in  the  State,  it  could  tax  the  privilege  of 
selling  them  after  they  had  been  shipped  into  its  jurisdic- 
tion and  stored  in  a  storehouse,  in  this  case  a  railroad 
depot  rented  for  the  purpose.  The  property  then  can  be 
taxed  as  other  property  in  the  State.  It  is  immaterial  that 
the  goods  in  the  State  are  in  the  original  packages,  provided 
of  course  they  are  not  imported  foreign  goods. ^ 

It  is  immaterial  that  the  goods  sent  into  the  State  on 
orders  forwarded  by  the  drummer  are  packed  in  a  box  and 
consigned  to  him  for  distribution  therefrom.  The  opening 
of  the  box  in  such  case  does  not  cause  the  property  to 
become  mingled  with  the  property  of  the  State  for  taxa- 
tion.^ 

Whether  such  goods  thus  sent  into  the  State  and  there 
stored  for  the  purposes  of  sale  are  taxable  or  not,  of  course 
depends  upon  the  laws  of  the  State.  It  has  power  to  tax 
them,  because  they  are  within  its  jurisdiction,  and  it  also 
has  power  to  tax  the  business  of  selling  them.  It  has 
been  held  however  that  such  sending  of  goods  into  a 
State  by  a  foreign  corporation  does  not  constitute  ' '  doing 
business  "  within  the  State.      See  infra,   §  175.^ 

1  In  re  May,  82  Fed.  Rep.  422,  432,  and  see  cases  cited  supra,  §  109  et 
seq.  See  also  In  re  Nichols,  48  Fed.  Rep.  164,  wtiere  the  ordinance  im- 
posing a  license  was  held  void  in  the  case  of  a  book  agent,  although  the 
books  sold  by  him  were  delivered  from  a  stock  in  a  branch  ofl5ce  or  store- 
room in  Pittsburgh,  replenished  from  time  to  time  by  the  publisher. 
The  point  here  involved,  as  to  the  effect  of  this  renting  of  a  storeroom, 
was  not  discussed  in  the  opinion. 

2  In  re  Spain,  47  Fed.  Rep.  208. 

3  The  distinction  between  the  taxing  power  of  the  State  over  prop- 
erty within  its  jurisdiction  and  the  actual  exercise  of  that  power  is 
illustrated  in  People  ex  rel.  Mills  v.  Commissioners  of  Taxes  of  New 
York,  23  N.  Y.  242,  where  it  was  held  that  manufactured  goods,  owned 
by  non-residents  and  sent  into  New  York  for  mere  purposes  of  sale  with- 
out reinvestment  of  the  proceeds,  were  not  taxable  under  the  provisions 
of  the  New  York  statute. 


160  INTEEFERENCE    WITH    INTERSTATE    COMMERCE.     §    149 

A  party  sells  goods  as  owner,  not  as  agent,  and  is  accord- 
ingly subject  to  a  license  tax,  where,  after  obtaining  orders 
therefor  from  resident  customers  for  anon-resident  concern, 
he  submits  these  orders,  and,  having  obtained  the  goods, 
which  are  charged  to  him  individually  aud  shipped  directly 
to  him  in  bulk,  he  delivers  the  goods  to  the  several  customers 
and  collects  the  price. i  The  distinction  is  between  the 
sales  made  by  a  party  as  agent  for  a  non-resident  principal 
and  sales  made  by  a  party  for  himself  on  his  own  account. 

§  149.  Discrimination  mast  be  more  than  an  incidental 
disadvantage. 

To  constitute  discrimination  in  taxation  against  a  non- 
resident manufacturer  or  dealer,  there  must  be  more  than 
a  mere  incidental  disadvantage ,  not  growing  out  of  any 
intention  on  the  part  of  the  legislature  to  make  a  hostile 
distinction.  The  act  must  show  an  intention  to  discrim- 
inate. Thus,  in  a  recent  case,^  a  tax  levied  by  the  State 
of  Ohio  upon  every  person,  corporation  or  partnership 
carrj  ing  on  the  business  of  trafficking  in  spirituous,  vinous 
or  intoxicating  liquors  was  adjudged  valid,  aud  the  bill 
filed  b}^  a  brewing  company  of  West  Virginia  to  enjoin  a 
county  treasurer  from  enforcing  a  collection  of  this  tax 
levied  on  beer  shipped  to  the  company's  Ohio  agent  and 
stored  for  delivery  in  its  cold  storage  house,  was  held 
properly  dismissed.  There  was  no  illegal  discrimination 
in  the  exemption  of  liquors  sold  upon  prescriptions  issued 
in  good  faith  by  ph3^sicians,  or  exclusively  for  chemical, 
pharmaceutical  or  sacramental  purposes ;  nor  in  the  fact 
that  the  sale  of  liquor  at  the  manufactory  by  the  manufac- 
turer in  quantities  of  one  gallon  or  more  at  one  time,  was 

1  Kimmellt?.  State,  lOlTenn.  184;  see  also  Croy  v.  Obion  County, 
104  Tenn.  525. 

2  Reymann  Brewing  Co.  v.  Brister,  179  U.  S.  445. 


§   150    INTERFERENCE   WITH   INTERSTATE    COaiMERCE.  161 

not  subject  to  the  tax.  The  plaintiff  claimed  that  the  latter 
provision  operated  as  an  illegal  discrimination  against  him, 
because  he  must  necessarily  sell  at  places  other  than  his 
manufactory.  The  court  however  replied,  that  manufac- 
turers both  within  and  without  the  State  could  sell  at  the 
manufactory  and  ship  to  any  part  of  Ohio,  and  the  inci- 
dental disadvantage  that  the  foreign  manufacturer  was 
under,  if  he  wished  to  establish  in  Ohio  a  place  for  mak- 
ing sales,  did  not  appear  to  arise  out  of  any  intention  on 
the  pait  of  the  legislature  to  make  a  hostile  discrimination 
against  foreign  manufacturers.  The  tax  in  this  case  was 
not  an  interference  with  interstate  commerce,  but  a  legiti- 
mate exercise  of  the  police  power  of  the  State  under  the 
Wilson  Act.i 

A  revenue  act  requiring  all  merchants  to  pay  as  a  license 
fee  a  certain  per  cent  on  the  total  amount  purchased  in  or 
out  of  the  State,  except  purchases  of  farm  products  from 
the  producer,  for  cash  or  on  credit,  was  not  a  tax  on 
the  privilege  of  purchasing  the  goods,  but  on  the  goods 
themselves  as  part  of  the  general  mass  of  property  in  the 
State,  and  such  a  tax  did  not  therefore  in  its  application 
to  purchases  outside  of  the  State,  operate  as  an  interfer- 
ence with  interstate  commerce. 2  Nor  did  the  fact  that  mer- 
chants would  probably  buy  more  products  from  resident 
than  non-resident  farmers  constitute  such  interference. 

§  150.  A  tax  upon  peddlers  without  discrimination 
against  residents  or  products  of  other  States  is 
valid. 

The  taxation  of  peddlers  however,  without  discrimina- 
tion in  favor  of  either  the  residents  or  the  products  of  the 
State,  is  valid.     This  was  the  ruling  of   the  State  courts 


^  See  supra,  §  124. 

2  Ex  parte  Brown,  48  Fed.  Rep  (N.  C.)  435. 


162  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    150 

before  the  Supreme  Court  decided  the  question. i  Thus,  in 
the  case  cited,  decided  in  1853,  it  Avas  said  by  Chief  Justice 
Shaw  in  answer  to  the  objection  that  the  statute  licensing 
peddlers  was  an  interference  with  comnaerce:  "We  con- 
sider this  as  wholly  an  internal  commerce  which  the  States 
have  a  right  to  regulate,  and  in  this  respect  this  law  stands 
on  the  same  footing  with  the  laws  regulating  sales  of  wine 
and  spirits,  sales  at  auction,  and  very  many  others,  which 
are  in  force  and  constantly  acted  upon." 

The  question  first  came  before  the  Supreme  Court  in  the 
case  of  a  sewing  machine  agent  in  Tennessee,  who  was 
held  properly  convicted  for  the  failure  to  have  a  peddler's 
license,  the  court  saying  that  the  requiring  of  a  license 
from  each  peddler  without  reference  to  the  place  of  growth 
or  manufacture  of  his  wares,  was  neither  a  violation  of 
the  constitution  nor  an  attempted  regulation  of  commerce. ^ 
This  ruling  was  reaffirmed  in  a  later  case,  where  the  Mis- 
souri statute  condemned  by  the  court  in  the  Welton  case, 
which  had  been  re-enacted  without  the  discriminating 
clause,  was  construed  and  approved.^  The  opinion  runs 
as  follows,  at  page  311 :  — 

"The  defendant's  occupation  was  offering  for  sale  and 
selling  sewing  machines,  by  going  from  place  to  place  in 
the  State  of  Missouri,  in  a  wagon,  Avithout  a  license. 
There  is  nothing  in  the  case  to  show  that  he  ever  offered 
for  sale  any  machine  that  he  did  not  have  with  him  at  the 
time.  His  dealings  were  neither  accompanied  nor  followed 
by  any  transfer  of  goods,  or  of  any  order  for  their  trans- 
fer, from  one  State  to  another ;  and  were  neither  interstate 

1  See  Commonweallh  v.  Ober  (Mass.),  12  Cush.  493. 

2  Machine  Co.  v.  Gage,  100  U.  S.  676. 

3  Emert  v.  Missouri,  156  U.  S.  296.  Among  State  decisions  to  the 
same  effect  are:  Wrought  Iron  Range  Co.  u.  Carver,  118N.  C.  328;  City 
of  Carrollton  v.  Bazzette,  159111.  284;  Cole  v.  Randolph,  31  La.  Ann.  535; 
State  y.  Harrington,  68  Vt.  622;  State  v.  Richards,  32  W.  Va.  348. 


§    151     INTERFEKENCE    WITH    INTERSTATE    COMMERCE.  1G3 

commerce  in  themselves,  nor  were  the}^  in  any  way  directly 
connected  with  such  commerce.  The  only  business  or  com- 
merce in  which  he  was  engaged  was  internal  and  domestic ; 
and,  so  far  as  appears,  the  only  goods  in  which  he  was 
dealing  had  become  part  of  the  mass  of  projjertj^  within 
the  State.  Both  the  occupation  and  the  goods,  therefore, 
were  subject  to  the  taxing  power,  and  to  the  police  power, 
of  the  State. 

*'  The  statute  in  question  is  not  part  of  a  revenue  law. 
It  makes  no  discrimination  between  residents  or  products 
of  Missouri  and  those  of  other  States ;  and  manifests  no 
intention  to  interfere,  in  any  way,  with  interstate  commerce. 
Its  object,  in  requiring  peddlers  to  take  out  and  pay  for 
licenses,  and  to  exhibit  their  licenses,  on  demand,  to  any 
peace  officer,  or  to  any  citizen  householder  of  the  county, 
appears  to  have  been  to  protect  the  citizens  of  the  State 
against  the  cheats  and  frauds,  or  even  thefts,  which,  as  the 
experience  of  ages  has  shown,  are  likely  to  attend  itinerant 
and  irresponsible  peddling  from  place  to  place  and  from 
door  to  door." 

It  was  argued  in  this  case  on  behalf  of  the  company  own- 
ing the  sewing  machines  which  the  peddlerwas  selling,  that 
it  had  forwarded  its  machines  from  its  works  in  another 
State  as  "  a  m'atter  of  interstate  commerce  "  to  its  agent, 
to  be  sold  by  him  on  its  account,  and  that  the  exaction  of 
a  license  from  Emert  was  in  effect  a  regulation  of  com- 
merce ;  but  the  court  held  that  peddling  was  not  inter- 
state commerce. 

§  151.   Definition  of  a  peddler. 

The  court  in  this  case  adopts  the  definition  of  a  peddler 
given  by  Justice  Shaw  in  Commonwealth  v.  Ober,  supra^ 
§  150,  as  follows:  — 

*'  The  leading  primary  idea  of  a  hawker  and  peddler  is 
that  of  an   itinerant   traveling   trader,  who    carries  goods 


164         INTERFERENCE  VrLTH.   INTERSTATE    COMMERCE.     §   152 

about,  in  oi:der  to  sell  them,  and  who  actually  sells  them  to 
purchasers,  in  contradistinction  to  a  trader  who  has  goods 
for  sale  and  sells  them  in  a  fixed  place  of  business.  Super- 
added to  this  (though  perhaps  not  essential),  by  a  hawker 
is  generally  understood  one  who  not  only  carries  goods  for 
sale,  but  seeks  for  purchasers,  either  by  outcry,  which 
some  lexicographers  conceive  as  intimated  by  the  derivation 
of  the  word,  or  by  attracting  notice  and  attention  to  them 
as  goods  for  sale,  by  an  actual  exhibition  or  exposure  of 
them,  by  placards  or  labels,  or  by  a  conventional  signal, 
like  the  sound  of  a  horn  for  the  sale  of  fish." 

The  peddler  is  therefore  an  itinerant  trader,  one  who 
sells  and  delivers  wares,  usually  small,  from  house  to 
house.  It  is  not  necessary  that  he  should  be  personall}^ 
interested  in  the  sales.  He  may  be  paid  for  his  services  by 
salary  or  otherwise. 

It  was  held  in  the  District  of  Columbia  that  an  agent 
may  be  compelled  to  take  out  a  peddler's  license  who  sells 
goods  at  retail  from  house  to  house  and  delivers  them  at 
the  time  of  the  sale,  as  an  advertisement  for  a  wholesaler 
who  employs  him.i 

In  a  Virginia  case  it  was  said  that  a  peddler  is  a  person 
■who  does  not  keep  a  regular  place  of  business,  either  in  a 
house,  vacant  lot  or  elsewhere,  open  at  all  times  in  regular 
business  hours,  and  who  offers  wares  for  sale. 

§  152.  Peddlers  and  drummers. 

As  a  State  or  municipal  license  may  be  required  of  a 
peddler,  but  not  of  a  drummer,  the  question  has  been  raised 
in  several  cases  as  to  when  a  party  is  the  one  or  the  other.^ 

1  In  re  Wilson  (D.  C),  12  L.  R.  A.  625. 

2  Thus,  in  North  Carolina,  State  v.  Gorham,  115  N.  C.  721,  an  Itinerant 
who  sold  and  put  up  lightning  rods  was  held  properly  required  to  take 
out  a  license.  There  was  no  violation  of  interstate  commerce,  as  there 
was  a  distinction  between  the  business  of  selling  lightning  rods  and 


§  152    INTERFERTiJNCE   WITH   INTERSTATE    COMMERCE.  165 

Thus  it  was  held  in  the  United  States  Circuit  Court  in 
Missouri,!  that  a  single  sale  by  a  drummer  who  was  selling 
by  samples,  effected  by  his  delivery  of  the  article  that  he 
carried  with  him  as  a  sample,  did  not  make  him  a  peddler 
within  the  meaning  of  the  statute  of  Missouri  requiring  a 
license  of  peddlers.  The  court  said,  1.  c.  p.  542  :  "To  hold 
that  such  sporadic,  casual  sale  fixes  upon  the  party  the 
office  of  a  dealer  does  not  obtain  outside  of  the  practice 
under  the  revenue  laws,  which  are  designedly  rigid  and 
controlled  by  the  letter  of  the  act," 

But  a  party  is  none  the  less  a  peddler  within  the  meaning 

putting  them  up,  and  the  State  had  the  right  to  license  the  latter,  though 
no  extra  charge  was  made  therefor. 

In  State  v.  Caldwell,  127  N.  C.  521,  the  agent  of  a  non-resident  por- 
trait company,  having  made  contracts  of  sale  by  samples,  placed  the  pic- 
tures in  the  frames  in  his  room  at  the  hotel,  and  then  delivered  them  to 
the  purchasers.  The  court  decided  that  this  was  not  interstate  com- 
merce, distinguishing  the  case  from  Brennan  v.  Titusville  on  the  ground 
that  no  title  to  the  pictures  passed  until  they  were  put  into  the  frames 
and  delivered.  Judge  Clark  dissented,  holding  that  there  was  no  break- 
ing of  bulk  in  the  legal  sense  and  that  the  transaction  was  in  effect  a 
delivery  of  the  article  sold  by  sample. 

In  Georgia,  Racine  Iron  Co.  v.  McCommons,  HI  Ga.  536,  the  court 
held  that  an  itinerant  selling  smoothing  irons  was  none  the  less  a  peddler 
because  he  took  his  orders  first  by  sample  and  then,  after  the  lapse  of 
some  period  of  time,  whether  a  day,  week  or  month,  freighted  himself 
with  the  goods  and  filled  the  orders,  which  he  had  previously  procured 
by  a  house-to-house  canvass. 

Contra:  In  Wyoming,  State  w.  Willinghara,  9  Wyo.  290,  an  itinerant 
picture  agent  who  not  only  sold  by  sample  but  received  and  distributed 
the  pictures  and  frames,  was  held  to  be  engaged  in  interstate  commerce. 

In  Indiana,  a  book  agent  distributing  books  previously  sold  by 
sample,  was  held  to  be  engaged  in  interstate  commerce.  Huntington  v. 
Mahan,  142  Ind.  695. 

In  Texas,  where  orders  for  groceries  and  medicine  were  taken  by 
sample  and  brand,  forwarded  to  a  non-resident  firm  and  filled  on  ap- 
proval, and  the  goods  were  shipped  back  in  boxes  consigned  to  the  firm 
in  Texas,  where  they  were  unpacked  and  delivered  to  the  purchasers  from 
the  car,  it  was  held  that  this  was  interstate  commerce.  Turner  v.  State, 
41  Tex.  Crira.  Rep.  545.    Se*?  also  Miller  v.  Goodman,  40  S.  W.  Rep.  718. 

1  In  re  Houston,  47  Fed.  Rep.  539. 


166  INTERFERENCE    WITH    INTERSTATE    COMMERCE.     §    152 

of  the  statute  exacting  a  license  from  itinerant  traveling 
traders,  when  lie  goes  from  house  to  house  and  sells  and 
delivers  goods  which  he  carries  with  him,  although  he  may 
occasionally  sell  by  sample  and  forward  the  order  to  his 
non-resident  principal.  In  other  words,  it  is  immaterial  that 
he  occasionall}^  transacts  business  in  interstate  commerce, 
if  he  is  at  the  same  time  a  peddler  within  the  meaning  of 
the  State  statute.  Thus,  in  a  case  under  the  same  Missouri 
law,  the  party  went  from  house  to  house  carrying  a  single 
harrow  with  him,  which  he  sometimes  sold  and  delivered, 
and  then  replaced  by  another  from  the  warehouse  where 
the  harrows  were  stored,  but  which  in  other  cases  he  used 
as  a  sample  and  thereafter  filled  the  order.  The  Supreme 
Court  of  the  State  held  that  this  agent  was  a  peddler.  In 
this  case  however  the  harrows  were  stored  in  the  State, 
so  that  the  transaction  in  any  event  was  not  one  of  inter- 
state commerce.^ 

Some  of  the  State  courts  and  United  States  Circuit 
Courts,  particularly  before  the  decision  of  the  Supreme 
Court  in  Emert  v.  Missouri,  in  sustaining  the  right  to  tax 
peddlers,  held  that  the  original  packages  shipped  from 
other  States  were  still  the  subjects  of  interstate  commerce 
until  sold,  although  stored  in  a  warehouse  in  the  State. ^ 
But,  as  already  shown,  see  §115,  supra,  the  original  pack- 
age in  interstate  commerce,  when  stored  in  the  State  un- 
sold, is  protected  against  its  police  power,  but  not  against 
its  taxing  power.  One  State  cannot  exclude  the  original 
package  coming  from  another  without  the  consent  of  Con- 

1  State  V.  Snoddy,  128  Mo.  523;  State  v.  Wessell,  109  N.  C.  735; 
American  Harrow  Co.  v.  Shaffer,  68  Fed.  Rep.  750.  See  also  French  v. 
The  State,  52  L.  R.  A.  160,  where  the  court  held  that  the  agent  of  a  non- 
resident organ  company  carying  an  organ  in  a  wagon  which  he  some- 
times delivered  and  sometimes  used  as  a  sample,  sending"  an  order  for 
one  to  be  shipped  to  the  purchaser,  was  engaged  in  interstate  commerce. 

2  See  French  v.  The  State,  s?fpra;  Commonwealth  v.  Harmel,  166  Pa. 
89. 


§   153    INTERFERENCE    WITH    INTERSTATE    COMMERCE.  167 

gress;  but  when  stored  within  its  jurisdiction  for  the 
account  of  the  non-resident  owner,  it  is  subject  to  taxation 
like  other  property  of  the  State;  see  authorities  supra, 
§  111.  The  State  therefore  has  the  power  to  tax,  not  only 
the  property,  but  also  the  occupation  of  selling  it.  The 
test  of  its  taxing  power  is  the  presence  of  the  property 
sold  within  its  jurisdiction  at  the  time  of  the  sale. 

§  153.  Liceiisiug-  under  the  police  power. 

The  State  can  license  occupations  as  well  for  police  reg- 
ulation, in  the  interest  of  public  health  and  morals,  as  for 
purposes  of  revenue.  The  licensing  of  itinerant  traders 
has  been  sustained  on  both  grounds.  Thus  the  Supreme 
Court  said  in  Emert  y.  Missouri,  si/yjra,  §  150,  that  the  object 
of  the  statute  in  that  case  under  consideration  was  to  protect 
the  citizens  against  the  cheats  and  frauds,  or  even  thefts, 
which  the  experience  of  ages  had  shown  Avere  likely  to  attend 
itinerant  and  irresponsible  peddling  from  place  to  place 
and  from  door  to  door. 

A  statute  then,  obviously  intended,  not  to  raise  revenue, 
but  to  protect  the  public,  will  be  sustained,  although  inci- 
dentally it  may  aifect  interstate  commerce.  See  note, 
§  143,  supra. 

Thus,  in  an  Iowa  case,i  a  license  on  itinerant  vendors 
of  drugs  was  held  valid,  although  defendant  sold  in  the 
original  packages,  the  court  saying  that  the  primary  object 
of  the  act  was  not  to  derive  revenue  for  the  State,  but  in 
large  part  at  least  to  protect  its  citizens  against  solicitations 
and  harmful  practices  of  irresponsible  and  unknown  vendors 
of  drugs,  and  that  the  prohibited  act  could  be  committed 
without  any  sale. 

Licenses  required  of  liquor  dealers  are  therefore  within 

1  Iowa«.  Wheelock,  95  Iowa,   577;  State  v.  Smithson,    106  Mo.  149. 
See  also  Commonwealth  v.  Newhall,  164  Mass.  338. 


168         rNTEEFERENCE    WITH    INTERSTATE    COMMERCE.     §   154 

the  legitimate  police  power  of  the  State.  But  even  such 
licenses  must  not  discriminate  against  the  citizens  or  prod- 
ucts of  other  States,i  nor  can  there  be  any  interference, 
without  the  consent  of  Congress,  with  the  shipment  of 
original  packages  into  the  State.  But  the  requirement  of 
a  license,  though  the  issue  of  it  depends  upon  the  permis- 
sion of  a  majority  of  a  board  and  the  approval  of  adjacent 
property  owners,  provided  there  be  no  discrimination,  is 
not  in  violation  of  the  Federal  Constitution. ^ 

§  154.  Police     power   cannot     interfere   witli  interstate 
commerce. 

The  police  power  of  the  State  therefore,  whatever  may 
be  the  subject,  must  be  exercised  subject  to  the  national 
control  over  commerce.  It  cannot  interfere  with  this, 
under  the  guise  of  restraining  peddling  from  door  to  door  by 
irresponsible  parties .  Thus  it  was  strongly  urged  in  the  case 
of  Brennan  v.  Titusville,  supra,  §  142,  in  the  words  of  the 
Supreme  Court  of  the  State,  that  if  canvassers,  hawkers 
and  peddlers  coming  from  other  States  and  infesting  the 
homes  of  the  citizens  at  all  seasons  and  imposing  their 
worthless  goods  upon  gullible  or  inexperienced  housemaids 
or  housewives,  should,  under  the  guise  of  interstate  com- 
merce, be  permitted  without  any  restraint  whatever  to  go 
on  deceiving  and  injuring  the  public,  it  would  be  a  startling 
and  unlooked  for  result  of  the  investment  of  the  general 
government  with  the  power  to  regulate  commerce.  But  the 
Federal  Supreme  Court  answered,  page  298, that  the  license 
did  not  purport  to  be  exacted  in  the  exercise  of  the  police,  but 

1  Tiernan  v.  Rinker,  102  U.  S.  123;  Walling  w.  Michigan,  116  U.  S.  446 
overruling  People  v.  Walling,  53  Mich.  264;  Minneapolis  Brewing  Co. 
V.  McGillivray,  104  Fed.  Rep.  258;  see  also  Pabst  Brewing  Co.  v.  Terre 
Haute,  98  Fed.  Rep.  330;  State  v.  Zopby,  84  N.  W.  R.  391,  14  S.  Dak. 
119;  Cullman  v.  Arndt,  125  Ala.  581,  State  v.  Lichtenstein,  44  W.  Va.  99. 

2  In  re  Christensen,  85  Cal,  208;  Hinson  v.  Lott,  8  Wall.  148. 


§   155    INTERFERENCE    WITH   INTERSTATE    COMMERCE.  169 

rather  of  the  taxing  power,  and  that  it  was  not  designed  to 
protect  from  imposition  or  wrong  either  minors,  habitual 
drunkards,  or  persons  under  any  other  affliction  or  disa- 
bility. There  was  no  charge  that  the  goods  which  defend- 
ant was  engaged  in  selling,  i.  e.,  pictures  and  picture  frames, 
were  open  to  any  condemnation,  and  they  were  in  fact  un- 
challenged subjects  of  commerce.  "  There  is  no  charge  of 
dealing  in  obscene  or  indecent  pictures,  or  that  the  pictures, 
or  the  frames,  were  in  any  manner  dangerous  to  the  health, 
morals,  or  general  welfare  of  the  community."  The  court 
therefore  held  that  the  act  was  not  a  legitimate  exercise  of 
the  police  power,  but  was  a  direct  interference  with  inter- 
state commerce.i 


§  155.   Supreme   Court  not  concluded  by   title  as  to  pur- 
pose of   act. 

In  determining  whether  a  license  is  exacted  in  the  legiti- 
mate exercise  of  the  police  power  of  the  State,  the 
Supreme  Court  is  not  concluded,  as  to  the  purpose  of  the 
act,  by  either  the  recital  of  the  purpose  or  the  title.  Thus, 
inBrennanv.Titusville,  suprm,  §  142,  while  the  courtfound 
that  the  ordinance  was  declared  in  the  title  to  be  for  ffen- 
eral  revenue  purposes,  it  said  that  even  if  that  declaration 

_  1  In  Arnold  v.  Yanders,  56  Ohio  417,  47  N.  E.  Rep.  50,  the  act  of  Ohio, 
making  it  unlawful  to  sell  or  expose  for  sale  within  the  State  convict 
made  goods  without  first  obtaining  a  license  of  $500  per  annum,  was  held 
void  as  interfering  with  commerce. 

The  Texas  statute  imposing  an  occupation  tax  of  $500  upon  every 
person,  firm  or  association  engaged  in  selling  the  "  Sunday  Sun,",  the 
"  Kansas  City  Sunday  Sun,"  or  other  publications  of  like  character,  be- 
ing applicable  to  all  persons,  whether  residents  of  the  State  or  not,  en- 
gaged in  selling  '<  publications  of 'like  character"  with  those  specifically 
mentioned,  was  held  not  a  discrimination  against  either  the  person  or 
the  property  of  the  owners  of  the  publications  named,  but  a  legitimate 
exercise  of  the  police  power,  and  therefore  not  invalid  as  a  regulation  of 
interstate  commerce.  Preston  v.  Finley  (C.  C),  72  Fed.  Rep.  850. 
See  also  similar  statute  sustained  in  17  Tex.  App.  253. 


170  INTERFERENCE    WITH    INTERSTATE    COMMERCE.    §    156 

had  been  reversed  and  the  hcense  had  been  declared  in 
terms  to  have  been  enacted  as  a  police  regulation, 
that  would  not  decide  this  question,  for  whatever  may 
be  the  reason  given  to  justify,  or  the  power  invoked 
to  sustain,  the  act  of  the  State,  if  that  act  is  one 
which  trenches  directly  upon  that  which  is  exclusively 
within  the  jurisdiction  of  the  national  government,  it  can- 
not be  sustained.  The  Supreme  Court  however,  in  this 
as  in  other  cases,  adopts  the  construction  given  by  the 
State  court  to  the  statute,  and  then  determines  whether 
the  statute  as  thus  construed  and  enforced  by  the  State 
court  is  an  interference  with  interstate  or  foreign  com- 
merce.    See  supra,  §  62. 

§  156.  Is  a  license  act  void  in  part  void  in  toto  ? 

When  a  discriminating  feature  of  a  statute,  or  a  provi- 
sion laying  a  tax  upon  sales  by  non-residents  and  thus  inter- 
fering with  commerce,  is  held  void,  whether  other  pro- 
visions of  the  statute,  providing  for  the  taxation  of  resi- 
dents and  parties  not  engaged  in  interstate  commerce,  are 
void  likewise  is  a  matter  of  construction  of  the  State  stat- 
ute, upon  which  the  judgment  of  the  State  court  is  con- 
clusive, so  that  no  Federal  question  is  -raised.  The  decision 
obviously  depends  upon  whether  it  can  be  assumed  that 
the  legislature  would  have  enacted  the  statute  without  the 
discrimination.!  Thus  in  the  Income  Tax  Cases  the  Su- 
preme Court  held  that  the  tax  upon  incomes  constituted  an 
entire  scheme  of  taxation,  which  Congress  would  not  have 
enacted  except  as  an  entirety ;  and  the  invalidity  of  certain 
provisions  was  therefore  held  to  invalidate  the  law.^ 

1  See  State  v.  O'Connor,  5  N.  Dak.  629. 

2  Infra,  Sec.  479. 


CHAPTER    Y. 

REGULATION  OF    COMMERCE,  CONTINUED. 

§  167.  Rights  of  foreign  corporations  in  interstate  commerce. 

158.  Foreign    corporation   "docs    business"   in   State  only  through 

comity  of  State. 

159.  Right  to  impose  discriminating  taxation  as  condition  of  admission 

into  State. 

160.  Foreign  insurance  companies. 

161.  Same  principle  extended  to  foreign  insurance  associations. 

162.  Foreign  corpurations  not  admitted  into  State  under  United  States 

treaty. 

163.  State  has  power  to  change  conditions  of   admission  of  foreign 

corporations. 

164.  Retaliatory  legislation  in  condition  for  admission. 

165.  Pembina  Mining  Company  v.  Pennsylvania. 

166.  Horn  Silver  Mining  Company  v.  New  York. 

167.  Right  to  discriminate  against  foreign  corporations. 

168.  Discrimination  limited  to  imposition  of  conditions  for  admission. 

169.  Distinction  however  academic  rather  than  practical. 

170.  Holding  United   States  bonds  by  foreign  corporation  does  not 

exempt  it  from  taxation  on  corporate  franchises. 

171.  Nor  is  foreign  corporation  engaged  in  importing  business  exempt 

from  tax  on  corporate  franchises. 

172.  Tax  upon  capital  employed  within  State. 

173.  Discrimination  in  favor  of  State  manufactures  in  foreign  corpo- 

ration tax. 

174.  "  Doing  business  "  in  State. 

175.  "What  is  not  "  doing  business  "  in  State. 

176.  Ownership  of    property  in  State  does  not  of    itself  constitute 

"doing  business"  in  State. 

177.  Holding  stock  in  domestic  company  by  foreign  company  is  not 

"  doing  business  "  by  latter  in  State. 

178.  Supreme  Court  of    Pennsylvania  on  what  constitutes    "doing 

business." 

179.  What  is  "  doing  business  "  in  State. 

180.  "  Doing  business"  by  holding  interest  in  limited  partnership. 

181.  Must  have  business  domicile  in  State. 

182.  Corporations    engaged  in  Federal  business  or  interstate   com- 

merce. 

(171) 


172        STATE   TAXATION    OF    FOEEIGN    CORPORATIONS.     §   157 

§  183.  Corporations  engaged  in  "carrying  on  interstate  commerce." 
184.  Corporation  carrying  on  interstate  commerce  not  exempt  from 
charges  for  privilege  of  incorporation. 


§  157.  Right  of  foreign  corporations  in   interstate  com- 
merce. 

In  the  i^rotection  of  interstate  commerce  against  discrim- 
inating or  interfering  State  taxation,  there  is  no  distinction 
between  non-resident  individuals  and  corporations.  Cor- 
porations, it  is  true,  are  not  citizens  within  the  meaning  of 
Article  IV.,  Section  2  of  the  Constitution,  providing  that 
citizens  of  each  State  shall  be  entitled  to  aU  the  privileges 
and  immunities  of  citizens  in  the  several  States,  though 
they  are  persons,  as  will  be  sean,  within  the  meaning  of  the 
Fourteenth  Arhendment,  and  therefore  entitled  to  due  pro- 
cess of  law  and  the  equal  protection  of  the  laws.  The  right 
to  engage  in  interstate  commerce  however  does  not  depend 
upon  citizenship,  and  the  capacity  of  the  foreign  corpora- 
tion to  do  so  must  be  determined  by  its  own  charter  as 
granted  hy  the  State  of  its  creation,  and  by  the  law  of  the 
State  in  which  it  is  carrying  on  business.  A  manufactur- 
ing company  therefore,  incorporated  and  doing  business 
under  the  laws  of  one  State,  can  send  its  commercial 
travelers  soliciting  sales  through  other  States,  and  mav 
ship  its  goods  to  the  purchasers  or  to  its  agents  for  deliv- 
ery to  purchasers.  In  like  manner,  foreign  corporations 
may  employ  commercial  brokers  in  different  States,  and 
such  brokers  will  be  entitled  to  the  same  protection  in 
transacting  interstate  commerce  as  if  they  were  employed 
by  non-resident  individuals.  These  principles  are  so  well 
established  that  it  is  unnecessary  to  cite  authorities  in  their 
support.  1 

1  Coit  V.  Sutton,  102  Mich.  324,  25  L.  E.  A.  819,  and  cases  cited  in 
opinion. 


§   159     STATE   TAXATION   OF   FOREIGN   COEPORATIONS.         173 

§  158.  Foreign  corporation  does  business  in   State  only 
throiigli  comity  of  State. 

It  is  equally  well  established  that  the  foreign  corpora- 
tion, unless  actually  employed  in  the  service  of  the  Fed- 
eral Government  or  in  furnishing  the  facilities  of  interstate 
commerce,  e.  rj.^  an  interstate  carrier,  cannot  come  into  a 
State  and  "do  business"  therein  without  the  consent  of  the 
State. 1  While  the  foreign  corporation  may  sell  its  goods  in 
the  State,  or  solicit  sales  in  the  transaction  of  interstate  com- 
merce, as  a  right,  it  can  only  establish  itself  in  the  State 
and  do  business  therein,  as  a  privilege  granted  b}^  the  State. 
While  the  State  cannot  tax  the  exercise  of  the  rio-ht,  it  can 
tax  the  enjoyment  of  the  privilege.  As  the  State  has  the 
right  to  exclude  foreign  corporations,  it  necessarily  has, 
involved  therein,  the  right  to  impose  conditions  on  their 
admission  into  its  jurisdiction. 2 

§  159.  Right  to  impose  discriminating  taxation   as  con- 
dition of  admission  into  State. 

As  the  State  has  the  right  to  determine  the  conditions  of 
admission  of  foreign  corporations  into  the  State  to  do  busi- 
ness therein,  it  has  the  right  to  make  the  grant  of  this 
privilege  conditional  upon  the  payment  of  a  license  tax  and 
to  fix  the  sum  in  its  discretion.  The  absolute  power  of 
exclusion  includes  the  right  to  allow  a  conditional  and  re- 
stricted exercise  of  the  corporate  powers  in  the  State.  The 
situation  is  analogous  to  the  grant  of  a  corporate  charter 
by  the  State,  which  confers  the  right  to  act  in  a  corporate 
capacity  upon  such  terms,  as  it  deems  proper.  In  like 
manner,  the  grant  to  a  foreign  corporation  of  the  right  to 
act  in  a  corporate  capacity  within  the  State  is  made  upon 
such  terms  as  the  State  deems  proper  to  impose. 

1  Bank  of  Augusta  v.  Earle,  13  Peters,  519;  Lafayette  Ins.  Co.  v, 
French,  18  How.  451,452. 

2  Waters-Pierce  Oil  Co.  w.  Texas,  177  U.  S.  28. 


174  STATE   TAXATION   OF   FOREIGN   CORPORATIONS.    §  161 

§  160.  Foreign  insurance  companies. 

This  principle  was  illustrated  in  a  case  from  Illinois,  where 
the  Supreme  Court  held  valid  a  license  tax  exacted  from 
foreign  insurance  companies  of  two  dollars  upon  every  one 
hundred  dollars  of  premium  collected  in  Illinois. i  This 
sum  was  charged  as  the  amount  of  the  license,  to  be  paid  as 
a  condition  of  doing  business  in  the  State.  The  court 
quoted  one  of  its  former  decisions  2  to  the  effect  that  a 
foreign  insurance  company  has  no  right  to  do  business  in 
the  State  without  the  State's  consent,  and  that  the  business 
of  insurance  is  not  interstate  commerce,  and  concluded :  "  as 
to  the  nature  or  degree  of  discrimination,  it  belongs  to 
the  State  to  determine,  subject  only  to  such  limitations  on 
her  sovereignty  as  may  be  found  in  the  fundamental  law 
of  the  Union." 

§  161.  Same  principle  extended  to  foreign  insurance  as- 
sociations. 

The  same  ruhng  was  extended  by  the  court  to  an  Eng- 
lish association  organized  under  what  was  known  as  a 
"  deed  of  settlement,"  legalized  and  enlarged  by  the  acts 
of  Parliament,  which  had  many  of  the  attributes  generally 
found  in  corporations  for  pecuniary  profit.  It  had  a  dis- 
tinctive name  and,  under  the  statute,  could  sue  and  be 
sued  in  the  name  of  one  of  its  ofiicers,  though  it  had  no 
common  seal.  The  State  of  Massachusetts  enacted  a  stat- 
ute imposing  a  tax  of  four  per  cent  upon  all  premiums  col- 
lected by  a  foreign  insurance  company,  two  per  cent  upon 
those  of  companies  incorporated  under  the  laws  of  another 
State  of  the  United  States,  only  one  per  cent  upon  those  of 
a  Massachusetts  company,  and  no  tax  at  all  where  the  busi- 
ness of  insurance  was  transacted  by  natural  persons,  citizens 

1  Ducat  ».  Chicago,  10  Wall.  410. 

2  Paul  V.  Virginia,  8  Wall.  168. 


§   162     STATE    TAXATION   OF   FOKEIGN   CORPORATIONS.         175 

of  Massachusetts.  It  was  argued  that  this  association  was 
not  a  corporation,  but  a  body  of  natural  persons.  But  the 
court  held,  affirming  the  Supreme  Court  of  Massachusetts,! 
that,  as  the  law  of  corporations  is  understood  in  this  coun- 
try, the  association  was  a  corporation,  and  that  the  court 
could  pay  no  attention  to  the  local  policy  of  England  in  de- 
termining whether  an  association  was  an  incorporated  body. 
The  court  therefore  said  that  the  company  could  not  exer- 
cise its  functions  in  the  State  of  Massachusetts  without  the 
payment  of  this  specific  tax  as  a  condition,  and  that  the 
imposition  of  such  a  tax,  discriminating  as  it  was,  was  no 
violation  of  the  Federal  Constitution  or  of  any  treaty  pro- 
tected by  it. 

§  162.  Foreign  corporations  not  admitted  into  State  under 
United  States  treaty. 

As  the  right  of  the  State  to  determine  who  shall  act  in  a 
.  corporate  capacity  within  its  limits  is  an  attribute  of  its 
sovereignty,  subject  only  to  the  control  of  the  Constitution 
of  the  United  States,  it  follows  that  a  corporation  organ- 
ized in  a  foreign  country,  having  its  principal  place  of 
business  there,  can  derive  no  right  to  do  business  in  the 
State  through  treaty  stipulations  between  the  United  States 
and  that  country.  Thus  it  was  held  that  a  corporation 
organized  in  England  was  not  a  subject  of  that  country 
within  the  "meaning  of  the  treaty  giving  its  subjects  the 
right  to  do  business  in  any  State  of  the  Union  on  the 
same  teyms  as  natives. 2 

J  Liverpool  Ins.  Co.  v.  Massachusetts,  10  Wall.  566.  Justice  Bradley 
concurred  in  the  result,  but  thought  the  company  was  a  special  partner- 
ship or  joint-stock  company,  ■which  came  nevertheless  within  the  scape 
of  the  Massachusetts  statute.  See  also  Southern  B.  &  L.  Assn.  v.  Nor- 
man, 98  Ky.  294. 

2  Scottish  Union  Ins.  Co.  v.  Herriott,  109  Iowa,  606.  See  also  Liver- 
pool Ids.  Co.  v.  Massachusetts,  supra,  §  161. 


176         STATE   TAXATION    OF   FOEEIGN   COEPOEATIOXS.    §   164 

§  163.  State    lias    power    to  change  conditions  of  admis- 
sion of  foreign  cori)orations. 

As  the  State  has  power  to  exclude  entirely,  it  has  power 
also  to  change  the  conditions  of  admission  of  foreign  cor- 
porations at  an}^  time  for  the  future,  and  to  impose  as  a 
condition  the  payment  of  a  new  tax  or  the  payment  of  a 
further  tax  as  a  license  fee.  When  it  requires  such  license 
fee  as  a  prerequisite,  for  the  future,  the  foreign  corpora- 
tion, until  it  pays  it,  is  not  admitted  within  the  State. 
"It  is  outside,  at  the  threshold,  seeking  admission,  with 
consent  not  yet  given."  It  is  immaterial  what  is  the  occa- 
sion of  the  change.  This  was  the  decision  of  the  Supreme 
Court  1  in  a  case  from  New  York,  where  a  change  in  the 
amount  of  the  annual  license  was  complained  of,  which 
effected  a  discrimination  as  between  corporations  coming 
from  one  State  and  those  of  the  same  class  coming  from 
others. 

§  164.  Retaliatory  legislation  in  condition  for  admission. 

In  the  last  cited  case,  the  change  in  the  conditions  of 
admission  was  effected  through  what  is  known  as  retalia- 
tory legislation,  that  is,  the  statute  provided  that,  whenever 
the  laws  of  an}"  other  State  should  require  from  a  New  York 
insurance  company  a  greater  license  fee  than  the  laws  of 
New  York  should  then  require  of  all  insurance  companies 
of  such  other  State,  all  such  companies  of  such  other 
State  should  pay  in  New  York  a  license  fee  equal  to  that 
imposed  by  such  other  State  on  New  York  companies. 
This  act  was  contested  in  the  State  court  on  the  gi'ound 

1  Philadelphia  Fire  Association  v.  New  York,  119  U.S.  110,  p.  119. 
Justice  Harlan  dissented,  saying  that  Pennsylvania  corporations  could 
not  be  subjected  to  higher  tases  in  N.  Y.  than  are  imposed  there  upon 
corporations  of  the  same  class  from  other  States ;  that  this  was  a  viola- 
tion of  the  equality  required  by  the  Fourteenth  Amendment.  See  infra, 
"  Equal  Protection  of  the  Laws,'*  Chapter  XV. 


§    1(35     STATE    TAXATION    OF    FOREIGN    CORPORATIONS.         177 

that  it  was  an  unlawful  delegation  of  legislative  j^ower. 
But  the  court  held  that  the  act  of  legislation  was  complete, 
and  that  it  was  competent  to  make  the  increase  take  effect 
in  a  given  contingency.^  Such  provisions  exist  in  the 
statutes  of  many  of  the  States,  and  have  been  almost  uni- 
formly sustained.  2 

In  the  Kansas  case  just  cited  it  was  said  in  the  opinion 
by  Judge  Brewer,  afterwards  Justice  Brewer  of  the  Supreme 
Court,  that  such  a  provision  is  more  properly  to  be  deemed 
one  for  reciprocity  than  for  retahation,  and  that  it  is  no 
violation  of  the  provision  of  the  State  constitution  for 
equality  in  taxation,  as  the  classification  of  foreign  cor- 
porations by  States  is  a  reasonable  and  proper  one. 

The  Supreme  Court  in  Philadelphia  Fire  Assn.  v.  New 
York,  supra,  §  163,  only  discussed  the  Federal  question, 
as  the  case  was  brought  before  it  on  writ  of  error  to 
the  highest  court  of  the  State,  and  the  decision  was  put 
upon  the  single  ground  that  the  change  in  the  conditions  of 
admission  was  within  the  power  of  the  State.  It  was  said 
in  the  State  court,  on  the  claim  that  the  conditions  violated 
the  Fourteenth  Amendment,  that  "  until  they  (the  foreign 
corporations)  are  within  our  jurisdiction,  the  final  clause 
of  article  14,  by  its  own  terms,  does  not  apply.  While 
they  stand  at  the  door  bargaining  for  the  right  to  come  in 
they  may  decline  to  come,  but  cannot  question  our  con- 
ditions if  they  do."^ 

§  165.  Pembina  Mining  Company  v.  Pennsylvania.* 

The  power  of  the  State  was  forcibly  illustrated  in  the 
case  of  the   Pembina    Mining  Company  v.  Pennsylvania, 

1  People  V.  Fire  Association,  92  N.  Y.  311;  see  also  ijifra,  §  174. 

2  Phoenix  Ins.  Co.  v.  Welch,  29  Kansas  672 ;  Home  Ins.  Co.  v.  Swigert, 
104  111.  653;  State  ex  rel.  v.  Insurance  Co.,  115  Ind.  257.  But  see  contra, 
Clark  V  Mobile,  67  Ala.  217. 

3  92  N.  Y.  p. 327. 

4  125  U.  S.  181. 

12 


178  STATE    TAXATION    OF    FOREIGN    CORPORATIONS.     §    166 

where  plaintiff  was  a  Colorado  company  having  its  princi- 
pal office  in  its  home  State,  but  having  another  in  Philadel- 
phia for  the  use  of  its  officers.  Pennsylvania  assessed 
against  the  corporation  for  an  office  license  a  tax  which 
amounted  to  $250,  one-quarter  of  a  mill  on  each  dollar  of 
its  million  dollars  of  capital  stock.  The  Supreme  Court, 
affirming  the  Supreme  Court  of  Pennsylvania,  held  that 
the  tax  was  valid,  and  said  at  page  186 :  — 

"  The  recognition  of  its  (the  corporation's)  existence 
in  Pennsylvania,  even  to  the  limited  extent  of  allowing  it 
to  have  an  office  with  its  limits  for  the  use  of  its  officers, 
stockholders,  agents  and  employees,  was  a  matter  depend- 
ent on  the  will  of  the  State.  It  could  make  the  grant  of 
the  privilege  conditional  upon  the  payment  of  a  license 
tax,  and  fix  the  sum  according  to  the  amount  of  the  author- 
ized capital  of  the  corporation.  The  absolute  power  of 
exclusion  includes  the  right  to  allow  a  conditional  and  re- 
stricted exercise  of  its  corporate  powers  within  the  State." 

§  166.  Horn  Silver  Mining  Company  v.  New  York. 

A  New  York  statute  provided  that  every  corporation, 
domestic  and  foreign,  should  be  subject  to  a  tax  upon  its 
corporate  franchises  or  business,  to  be  computed  by  a  cer- 
tain percentage  of  its  capital  stock,  measured  by  the 
dividend  on  the  par  value  of  that  stock,  or  where  there 
were  no  dividends  or  its  dividends  were  less  than  a  certain 
percentage  upon  the  par  value  of  the  capital  stock,  then 
according  to  a  certain  percentage  upon  the  actual  value  of 
the  capital  stock.  A  Utah  corporation  had  a  capital  stock 
of  ten  million  dollars  and  the  tax  assessed  thereon  was 
thirty  thousand  dollars,  which  however  it  refused  to  pay, 
claiming  that  the  tax  was  illegal.  The  evidence  showed 
that  it  paid  taxes  both  in  Utah  and  in  the  State  of  Illinois, 
and  that  the  greater  part  of  its  business,  as  well  as  the 
greater  part  of  the  capital  used  in  its  business,  was  out  of 


§    1(37      STATE    TAXATION    OF    FOREIGN    CORPORATIONS.  179 

the  State  of  New  York.      But   the    Supreme    Court    sus- 
tained the  tax,^  saying,  1.  c.  p.  313:  — 

"The  granting  of  the  rights  and  privileges  which  con- 
stitute the  franchises  of  a  corporation  being  a  matter  rest- 
ing entirely  within  the  control  of  the  legislature,  to  be 
exercised  in  its  good  pleasure,  it  may  be  accompanied  with 
any  such  conditions  as  the  legislature  may  deem  most  suit- 
able to  the  public  interests  and  policy.  It  may  impose  as  a 
condition  of  the  grant,  as  well  as,  also,  of  its  continued 
exercise,  the  payment  of  a  specific  sum  to  the  State  each 
year,  or  a  portion  of  the  profits  or  gross  receipts  of  the 
corporation,  and  may  prescribe  such  mode  in  which  the 
sum  shall  be  ascertained  as  may  be  deemed  convenient  and 
just.  There  is  no  constitutional  inhibition  against  the  leg- 
islature adopting  any  mode  to  arrive  at  the  sum  which  it 
will  exact  as  a  condition  of  the  creation  of  the  corporation 
or  of  its  continued  existence.  There  can  be,  therefore, 
no  possible  objection  to  the  validity  of  the  tax  prescribed 
b}^  the  statute  of  New  York,  so  far  as  it  relates  to  its  own 
corporations.  Nor  can  there  be  any  greater  objection  to  a 
similar  tax  upon  a  foreign  corporation  doing  business  by  its 
permission  within  the  State.  As  to  a  foreign  corporation  — 
and  all  corporations  in  States  other  than  the  State  of  their 
creation  are  deemed  to  be  foreign  corporations  —  it  can  claim 
a  right  to  do  business  in  another  State  to  any  extent,  only 
subject  to  the  conditions  imposed  by  its  laws." 

§  167.  Right  to  discriminate  against  foreign  corporations. 

It  is  not  essential  that  the  State  should  impose  the  same 
tax  as  a  condition  for  a  foreign  corporation  to  act  in  a  cor- 
porate capacity  in  the  State  that  it  charges  its  own  citizens 
for  organizing  under  its  own  laws  and  acting  in  a  corporate 

1  Horn  Silver  Mining  Co.  v.  New  York,  143  U.  S.  305. 


180         STATE    TAXATION    OF   FOREIGN   CORPORATIONS.    §   168 

capacity.  In  the  sense  that  it  has  the  right  to  determine 
what  shall  be  paid  in  each  case  for  the  privilege  of  acting  in 
a  corporate  capacity,  it  has  the  right  to  discriminate. 
Therefore  the  State  can  make  the  admission  of  a  foreign 
corporation  dependent  upon  the  payment  of  a  specific 
license  tax,  or  of  a  sum  proportionate  to  the  amount  of  its 
capital,  and  it  is  not  necessary  that  this  tax  should  be  spe- 
cifically entitled  a  license.  Thus,  in  the  case  last  cited, 
the  court  said  at  page  315  :  — 

"  The  counsel  for  the  appellant  objects  that  the  statute 
of  New  York  is  to  be  treated  as  a  tax  law,  and  not  as  a 
license  to  the  corporation  for  permission  to  do  busmess  m 
the  State.  Conceding  such  to  be  the  case  we  do  not  per- 
ceive how  it  in  any  respect  affects  the  validity  of  the  tax. 
However  it  may  be  regarded,  it  is  the  condition  upon  which 
a  foreign  corporation  can  do  business  in  the  State,  and  in 
doing  such  business  it  puts  itself  under  the  law  of  tho 
State,  however  that  may  be  characterized." 

§  168.  Discrimination  limited  to  imposition  of  conditions 
for  admission. 

It  was  said  in  the  same  opinion,  that  neither  an  individual 
member  of  a  foreign  corporation,  nor  the  corporation  it- 
self can  call  in  question  the  validity  of  any  exaction  which 
the  State  may  require  for  the  grant  of  its  privileges.  This 
obviously  refers  to  the  tax  imposed  for  the  privilege  of 
acting  in  a  corporate  capacity  in  the  State.  It  does  not 
mean  that,  after  the  corporation  has  been  admitted  into 
the  State  and  paid  the  charge  exacted  for  admission,  it  is 
not  entitled  to  due  process  of  law,  or  the  equal  benefit  of 
the  laws  under  the  Federal  Constitution,  or  equality  and 
uniformity  of  taxation  under  the  State  government.  The 
situation  is  therefore  analogous  to  that  of  a  domestic  cor- 
poration. The  State  may  impose  su3h  exaction  as  1^  pleases 
as  a  condition  for  granting  the  corporate  franchise,  but 


§  169  STATE  TAXATION  OF  FOREIGN  CORPORATIONS.    181 

when  the  corporation  is  organized,  its  property  is  to  be 
taxed  as  other  property,  subject  to  such  classification  and 
specification  as  may  lawfully  be  made. 

§  1G9.   Distinction  however  academic  ratber  tLan  prac- 
tical. 

So  far  as  the  taxing  power  of  the  State  is  concerned  with 
reference    to   foreign    corporations    admitted   through   its 
consent,  the  limitation  of  the  power  to  discriminate  in  tax- 
ation to  the   imposing    of   conditions  for  admission  is  aca- 
demic rather  than  practical,  for  the  reason  that   the    State 
may  require  the  submission  by  the  foreign  corporation  to 
discriminating  taxation  as  a  condition  of  its  continuing  in 
force  or  renewing  the  license  of  the  corporation  to  do  busi- 
ness within  its  confines. ^     It  is  true  the  State  cannot  require 
foreign  corporations  to  submit  to  an  unconstitutional  require- 
ment as  a  condition  of  admission.     Thus  a  stipulation  in  the 
license  to  do  business  that  the  foreign  corporation  will  not 
remove  a  case  to  the  Federal  court  is  void,  and  will  not  pre- 
vent the  removal  of  a  case,^  nor  can  the  company's  agent  con- 
tinuing to  do  business  be  punished  for  violation  of  a  statute 
containing  such  a  requirement. ^      But  on  the  other  hand, 
the  Federal    court  will  not  enjoin  the  enforcement  of  the 
revocation  of  a  license  to  do  business,  though  made  accord- 
ing to  the  terms  of  a  statute  directing  such  revocation  when 
the   company  removes   a   case    to   the  Federal  court.*    In 
this   latter   case   the    court   said  that  the  State    had  the 
power  to  exclude  the  foreign  corporation,  and  that  its  inten- 
tion or  reason  in  excluding  it  could  not  be  inquired  into.^ 

1  See  Philadelphia  Fire  Association  v.  New  Yorlc,  supra. 

2  Insurance  Co.  v.  Morse,  20  Wa)l.  445. 

3  See  Barron  v.  Buruside,  121  U.  S.  186. 

4  See  Doyle  v.  Insurance  Co.,  94  U.  S.  535. 

5  Justices  Bradley,  Swayne  and  Miller  dissented,  saying  that  though 
the  State  may  have  the  power,  if  it  sees  fit,  to  subject  its  citizens  to  the 
inconvenience  of  prohibiting  all  foreign  corporations  from  transacting 


182  STATE    TAXATIOX    OF    FOREIGN    CORPORATIONS.     §    171 

§170.  Holding  United  States  bonds  by  foreign  corpora- 
tion does  not  exempt  it  from  taxation  on  corpo- 
rate franchises. 

"Where  the  tax  is  upon  the  privilege  of  acting  or  doing 
business  in  a  corporate  capacitj'jit  is  immaterial  that  a  por- 
tion of  the  capital  stock  of  the  corporation  is  invested  in 
securities  of  the  United  States.  As  before  seen,  see  §  16, 
siqyra,  it  is  otherwise  v\'here  the  tax  is  upon  the  capital 
stock  or  property  of  the  company.  It  therefore  follows 
that  where  a  foreign  corporation  is  admitted  to  do  business 
in  the  State,  a  tax  imposed  upon  its  corporate  franchise  or 
right  to  do  business,  and  graduated  according  to  the  divi- 
deijds  of  the  company,  is  not  invalidated  by  the  fact  that 
a  portion  of  the  dividends  may  be  derived  from  interest 
on  capital  invested  in  United  States  bonds. ^ 

§  171.  Nor  is  foreign  corporation  engaged  in  importing 
bnsiness  exempt  from  tax  on  corporate  fran- 
chises. 

The  same  principle  has  been  extended  to  the  case  where 
a  foreign  corporation  is  engaged  in  importing  foreign  goods 
and  selling  the  same  in  the  original  packages.  Thus  in  a 
New  York  case  where  the  tax  was  imposed,  as  a  tax  upon  the 
franchise,  upon  the  amount  of  the  capital  stock  employed 
within  the  State,  and  a  part  of  the  business  of  a  Michigan 

business  within  its  jurisdiction,  it  has  no  power  to  impose  unconstitutional 
conditions  upon  their  transacting  business.  *  *  *  <'Any  agree- 
naent,  stipulation  or  State  law  precluding  them  from  this  right  is  abso- 
lutely void."  They  said  further  that  the  argument  that  the  greater 
always  includes  the  less,  and  that  therefore  if  a  State  may  exclude 
without  any  cause,  it  may  exclude  for  a  bad  cause,  is  unsound.  The 
practical  difficulty  with  this  reasoning  is  that  the  State  may  decline  to 
renew  the  periodical  license  without  assigning  an?/  reason.  In  Waters 
Pierce  Oil  Co.  v.  Texas.  177  U.  S.  28,  it  was  held  that  a  foreign  corpo- 
ration was  bound  by  the  conditions  of  the  permit,  whatever  its  limitations 
and  discriminations. 

1  Home  Ins.  Co.  v.  New  York,  134  U.  S.  594. 


§   172     STATE   TAXATION   OF   FOREIGN   CORPORATIONS.         183 

corporation  doing  business  in  New  York  consisted  in  the 
importation  of  crude  drugs  and  their  sale  in  original  pack- 
ages, it  was  contended  that  such  part  of  their  business, 
under  the  doctrine  of  Brown  v.  Maryland,  could  not  be 
taxed  by  the  State.     The  court  however  replied :  ^  — 

"  But  that  case  is  inapphcable.  Here  no  tax  is  sought 
to  be  imposed  directly  on  imported  articles  or  on  their  sale. 
This  is  a  tax  imposed  on  the  business  of  a  corporation, 
consisting  in  the  storage  and  distribution  of  various  kinds 
of  goods,  some  products  of  their  own  manufacture  and 
some  imported  articles.  From  the  vQry  nature  of  the  tax, 
being  laid  as  a  tax  upon  the  franchise  of  doing  business  as 
a  corporation,  it  cannot  be  aifected  in  any  way  by  the 
character  of  the  property  in  which  its  capital  stock  is  in- 
vested." 

§  172.  Tax  upon  capital  employed  within  State. 

Some  States  have  required,  as  a  condition  of  the  admis- 
sion of  a  foreign  corporation,  the  payment  of  such  part  of 
the  incorporating  tax,  fixed  by  the  laws  of  the  State,  as 
represents  the  portion  of  the  capital  of  the  foreign  cor- 
poration employed  within  the  State.  Such  a  tax  as  to 
corporations  doing  business  in  the  State  only  through  its 
consent  is  clearly  within  the  power  of  the  State  to  impose. 
In  other  States  the  foreign  corporation,  in  consideration  of 
the  privilege  of  doing  business  in  the  State,  is  required  to 
pay  an  annual  tax  upon  that  portion  of  its  entire  capital 
employed  within  the  State.  Such  capital  "  employed 
within  the  State"  would  in  any  event  be  subject  to  tlie 
taxing  power  of  the  State  as  property  or  business  within 
its  jurisdiction,  and  the  validity  of  such  a  tax  does  not  de- 
pend upon  the  consent  of  the  State  to  the  admission  of  the 

1  New  York  State  v.  Roberts,  171  U.  S.  664. 


184         STATE    TAXATION   OF   FOREIGN   CORPORATIONS.    §    173 

foreign  corporation.  The  validity  of  sucli  a  method  of 
taxing-  a  foreign  corporation  is  therefore  clear. ^ 

Under  the  rule  laid  down  in  the  Horn  Silver  Mining 
Company  case,  supra,  §  166,  the  State  could  exact  a  tax 
discriminating  against  the  foreign  corporation,  as  a  con- 
dition of  admitting  it,  and  in  such  event  the  only  remedy 
would  be  an  appeal  to  the  State  legislature  to  remedy  the 
unjust  discrimination.  But  where  the  tax  is  only  upon 
the  capital  employed  within  the  State,  there  is  no  discrim- 
ination to  complain  of. 

"What  is  the  amount  of  the  capital  employed  within  the 
State  is  a  question  of  fact,  whereon  the  coi-poratiou,  when 
allowed  a  hearing,  is  concluded  by  the  action  of  the  State 
tribunal ;  and  errors  in  the  determination  of  it  would  not 
present  a  Federal  question  for  review. ^ 

§  173.  Discrimination  in  favor  of  State  manufactures  in 
foreign  corporation  tax. 

The  provision  in  a  State  law  taxing  foreign  corporations 
upon  the  capital  employed  in  the  State,  but  exempting 
corporations  or  companies  wholly  engaged  in  manufactur- 
ing in  the  State,  was  held  in  New  York  State  v.  Roberts, 
supra,  to  involve  no  unlawful  discrimination  against  the 
manufactured  goods  of  other  States.  The  court  said,  at 
page  QQb:  "  It  is  said  that  the  operation  of  that  portion 
of  this  taxing  law  which  exempts  from  a  business  tax  cor- 
porations which  are  wholly  engaged  in  manufacturing 
within  the  State  of  New  York,  is  to  encourage  manufac- 
turing corporations  which  seek  to  do  business  in  that 
State  to  bring  their  plants  into  New  York.     Such  may  be 


1  See  New  York  State  v.  Roberts,  supra,  §  171. 

2  New  York  State  v.  Roberts,  supra. 


§    174     STATE    TAXATION    OF    FOREIGN    CORPORATIONS.  185 

the  tendency  of  the  legislation,  but  so  long  as  the  privileo-e 
is  not  restricted  to  New  York  corporations  it  is  not  per- 
ceived that  thereby  any  ground  is  afforded  to  justify  the 
intervention  of  the  Federal  courts."  ^ 

The  reference  in  the  last  sentence  quoted  to  the  fact  that 
the  privilege  was  not  restricted  to  New  York  corporations, 
seems  to  have  been  made  to  show  that  there  was  no  un- 
lawful discrimination  against  the  manufactured  products  of 
other  States,  and  thus  no  interference  with  interstate 
commerce.^ 

§  174  «  Doing  business  "  in  State. 

A  State  cannot  tax  the  foreign  corporation  for  the  priv- 
ilege of  doing  business  in  its  jurisdiction,  unless  it  actually 
does  business  therein,  and  what  constitutes  doing  business 
must  therefore  be  determined.  In  a  number  of  States  stat- 
utes have  been  enacted,  prescribing  terms  upon  which  for- 
eign corporations  shall  be  permitted  to  do  business.  These 
usually  include  the  filing  of  a  certificate  in  a  public  office, 

1  Justice  Harlan,  with  whom  Justice  Brown  concurred  (Justice  White 
not  sitting),  dissented,  saying  that  such  statutes  would  amount  to  a  tariff 
protecting  goods  manufactured  in  that  State  against  competition  in  the 
markets  there  with  goods  manufactured  in  other  States.  And  as  to  the 
fact  that  the  exemption  was  not  limited  to  New  York  corporations,  said 
at  page  683:  "This  view  falls  far  short  of  meeting  the  difficulty  pre- 
sented, namely,  that  the  statute  by  its  necessary  operation  injuriously 
discriminates  against  goods  manufactured  in  other  States,  in  that  such 
goods  are  not  permitted  to  go  into  the  markets  of  New  York  and  com- 
pete there  upon  equal  terms  with  like  goods  wholly  manufactured  in 
that  State.  This  court  has  often  said  that  the  objection  that  a  local 
statute  was  invalid  as  restraining  or  binding  commerce  among  the  States 
was  not  met  by  the  suggestion  that  it  operated  equally  upon  citizens  of 
the  State  which  enacted  it." 

2  See  Philadelphia  Fire  Association  v.  New  York,  supra,  §  163  etseq. 
The  New  York  statute  has  been  changed,  so  that  now  the  exemption  is 
extended  to  all  corporations  to  the  extent  of  the  capital  employed  in  the 
State  in  manufacturing  and  in  the  sale  of  the  product,  see  Tax  Laws 
of  New  York,  Ch.  24,  Sec.  183. 


186         STATE    TAXATION    OF   FOREIGN    CORPORATIONS.    §    175 

designating  the  principal  place  of  business  of  the  corporation 
in  the  State,  and  the  resident  agent  on  whom  process  may 
be  served.  Where  such  certificate  is  filed,  the  corporation 
is  concluded  by  the  admission  thereby  made  that  it  is  doing 
business  in  the  State,  and  is  accordingly  liable  for  the  taxa- 
tion imposed  upon  it  b}'^  way  of  license  fee  or  otherwise  as 
a  condition  of  its  admission.^  Penalties  are  provided  for 
the  transaction  of  business  in  the  State  on  behalf  of  such 
foreign  corporation  without  the  filing  of  a  certificate,  and 
questions  have  arisen  as  to  what  constitutes  "  doing  busi- 
ness "  with  reference  to  these  statutes.  But  it  is  not  within 
the  scope  of  this  work  to  consider  the  effect  of  non-com- 
pliance with  them  upon  the  contracts  of  the  corporation, 
or  upon  the  rights  of  foreign  corporations  to  bring 
suits  in  the  courts  to  enforce  such  contracts  made  in  the 
State. 2 

§  175.  What  is  not  doing  business  in  State. 

Irrespective  of  such  statutes  however,  a  corporation  is 
only  liable  to  State  taxation,  based  upon  its  "  doing  bus- 
iness," if  it  in  fact  does  business  in  the  State,  and  what  con- 
stitutes "  doing  business  "  under  such  circumstances  is  to 
be  determined  from  what  it  actually  does.  It  cannot  con- 
sist in  the  corporation  doing  what  it  has  the  right  to  do 
without  the  consent  of  the  State. 

Thus  a  foreign  corporation  is  not  doing  business  in  the 
State,  when  it  ships  its  goods  to  its  customers  or  sends  its 
commercial  agents  through  the  State  offering  to  sell  or 
buy,  in  the  course  of  interstate  commerce. 

Making  a  contract  in  the  State  was  held  by  the  Supreme 
Court  not  to  constitute  doinsj  business  therein,  within  the 
meaning  of  the  statute  requiring  the  filing  of  a  certificate 

1  People  V.  Philadelphia  Fire  Association,  92  N.  Y.  311. 

2  See  Taylor  on  Corporations,  4th  Ed.,  Sec.  401  and  cases  cited. 


§    176     STATE    TAXATION    OF    FOREIGN    CORPORATIONS.  187 

and  the  appointment  of  an  agent. ^  The  court  said  that  as 
the  statute  contemplated  one  or  more  known  places  of  bus- 
iness in  the  State,  it  could  not  apply  to  a  case  where  a 
corporation  had  only  done  a  single  act  and  did  not  propose 
to  do  more. 2 

The  doing  business  necessary  to  make  a  corporation 
amenable  to  tlie  taxing  power  of  a  State  must  be  distin- 
guished from  the  doing  business  Avhich  may  subject  a 
corporation's  agent  to  punishment  for  violation  of  the 
penal  laws  of  the  State,  where  he  undertakes  to  act  therein 
in  behalf  of  a  foreign  corporation  without  the  State's  con- 
sent. A  single  act  by  such  an  agent  might  subject  him  to 
punishment,  but  could  not,  whether  authorized  by  the  cor- 
poration or  not,  constitute  doing  business  within  the 
State  so  as  to  subject  the  corporation  to  its  taxing  laws. 

§  176.  Ownership  of  property  in  State  does  not  of  itself 
constitute  "  doing-  business  "  in  State. 

Neither  does  the  ownership  within  its  jurisdiction  of 
property,  which  becomes  subject,  as  property,  to  the  tax- 
ing laws  of  the  State,  constitute  of  itself  doing  business  by 
the  corporation  therein.-^  Thus  a  foreign  corporation  may 
ship  goods  into  the  State  to  a  commission  merchant  to  be 
sold  for  its  account,  and  cause  them  to  be  stored  in  a  ware- 
house in  the  State  so  that  they  become  subject  as  property 
to  the  taxing  laws  of  the  State,  see  supra,  §  148,  but  that 
does  not  of  itself  locate  the  corporation  in  the  State. 

1  Cooper  Mfg.  Co.  v.  Ferguson,  113  U.  S.  727,  Justices  Matthews  and 
Blatchford  basing  their  concurrence  on  the  ground  that  the  transaction 
itself  was  one  in  interstate  commerce  and  not  under  control  of  the  State. 

2  As  to  the  distinction  between  raaljing  a  contract  and  "  carrying  on 
business,"  see  also  Bamberger  v.  Schoolfleld,  160  U.  S.  140;  Wagner 
V.  Meakin,  33  C.  C.  A.  577;  Vaughan  Machine  Co.  v.  Lighthouse,  71  N. 
Y.  S.799;  Empire  Milling  and  Mining  Co.  v.  Tombstone  Co.,  100  Fed. 
910;  Swann  v.  Mutual  Reserve  Fund  Assn.,  100  Fed.  922;  Sullivan 
V.  Sheehan,  89  Fed.  Rep.  247. 

3  Missouri  Coal  &  Mining  Co.  v.  Ladd,  IGO  Mo.  435. 


188         STATE   TAXATION   OF   FOKEIGN   CORPORATIONS.    §    176 

Thus  it  was  held  in  Pennyslvania  that  the  Americau  Bell 
Telephone  Company  of  Boston,  a  Massachusetts  corpora- 
tion, which  leased  its  telephones  to  Pennsylvania  corpora- 
tions, to  be  by  them  operated  under  patents  owned  by  the 
patent  company  according  to  license  contracts,  did  not  in 
consequence  of  the  ownership  and  leasing  of  such  prop- 
erty become  subject  to  taxation  as  a  foreign  corporation 
doing  business  in  Pennsylvania. ^  The  court  said  the  tax 
was  not  upon  the  telephone  instruments  as  property,  but 
upon  the  capital  stock  of  the  company.  The  property  was 
in  the  State  and  subject  to  taxation,  but  the  company  was 
not. 

In  this  same  case  also,  it  was  held  that  the  furnishing  of 
means  to  the  domestic  company  by  the  lessor  company  to 
transact  business  under  the  patents  did  not  constitute  a  do- 
ing business  in  the  State  by  the  foreign  company. 

Though  not  a  taxation  case,  the  opinion  of  U.  S.  Cir- 
cuit Judge  Jackson,  later  Justice  of  the  Supreme  Court, 
in  United  States  v.  American  Bell  Tel.  Co.,  invoMng  the 
same  company,  is  illustrative.  It  was  claimed  that  the 
Massachusetts  company  was  ' '  carrjdng  on  business  ' '  in 
Ohio  so  "as  to  be  subject  to  service  of  process  "  through 
its  "  managing  agent  "  in  that  State,  and  that  the  agent  of 
the  domestic  company  was  the  ' '  managing  agent ' '  of  the 
defendant  through  the  relation  between  the  two  corpo- 
rations. The  court  said  that  none  of  the  facts,  which  were 
the  same  as  the  facts  in  the  Penns3dvania  case  above,  con- 
stituting the  relation  between  the  parties  was  a  '.'  carry- 
ing on  of  business  "  in  Ohio  by  the  foreign  company;  and 
that  the  authorities  do  not  define  with  exactness  what 
amounts  to  "  carrying  on  business,"  but  none  go  to  the 

1  Commonwealth  w.  American  Bell  Telephone  Co.,  129  Pa.  217;  see 
also  People  v.  American  Bell  Telephone  Co.,  117  N.  Y.  241 ;  Common- 
wealth V.  Standard  Oil  Co.,  101  Pa.  119;  United  States  v.  Americau 
Bell  Telephone  Co.,  29 Fed.  Rep.  17  (Ohio). 


§   177     STATE   TAXATION    OF   FOREIGN    CORPORATIONS.         189 

extent  of  holding  that  such  transactions  as  those  then 
under  consideration  are  sufficient.  On  the  matter  of  own- 
ing property  in  the  State,  the  court  said  at  page  44 :  "  But 
it  will  hardly  do  to  say  that  the  ownership  of  property 
in  the  State  is  the  doing  of  business  here  within  the  mean- 
ing and  intent  of ^  the  law  so  as  to  make  the  owner  person- 
ally present.  It  is  undoubted!}^  true  that,  in  respect  to  the 
particular  property  so  owned  and  located  within  its  limits, 
the  State  has  the  authority  to  proceed  against  it  {in  rem)  for 
the  purpose  of  taxation,  or  to  subject  it  to  the  payment 
of  valid  claims  and  demands  against  the  foreign  owner. 
It  cannot,  however,  serve  to  bring  the  ^erso?*  of  such  owner 
within  its  jurisdiction,  whether  that  person  be  a  private 
individual  or  a  patent-holding  corporation." 

§  177.  Holding  stock  in  domestic  company  byf oreign  com- 
pany is  not  "  doing-  business  "  by  latter  in  State. 

The  argument  was  advanced  in  People  v.  American  Bell 
Tel.  Co.,^  that  the  holding  stock  by  the  foreign  corporation 
in  the  domestic  company  constituted  a  doing  business  by  the 
former  in  the  State.  The  court  held  that  this  was  unten- 
able, saying  at  page  255:  "In  no  legal  sense  can 
the  business  of  a  corporation  be  said  to  be  that  of  its  indi- 
vidual stockholders.  It  is  true  that  they  have  an  interest 
in  the  business  carried  on  and  an  influence  in  controUiug  its 
conduct ;  but  they  have  created  a  legal  entity  to  control 
such  business,  make  its  contracts  and  be  responsible  for  its 
obligations,  and  that  entity  is  alone  responsible  to  persons 
dealing  with  it  for  the  conduct  of  such  business.  The  tax- 
ation of  a  foreign  or  domestic  stockholder  in  a  domestic 
corporation  upon  the  business  of  such  corporation,  upon 
the  theory  that  it  was  his  business,  would  be  an  unreason- 
able exercise  of  the  power  of  taxation." 

1  117  N.  Y.  241. 


^  17S.  Su|>r<Muo  C^oui't  ol'  l*<Miiis>  l\  iiiilii  oil  \>liii(  t-oiisi Uiil«*M 
*•  dolnu'  buf^huvNN  **  In  S(!i(«>  . 

A  vorv  illustrnllvo  ojiso  «s  to  whnt  is  ;nul  what  is  not  a 
iloiuj;'  husiuoNs  in  tho  Stnto  is  tho  tiooisioii  o(  (ho  SupnMuo 
t\>\ir(  of  l*onnsN  l\  !UU!»  \n  tho  «':is<>  of  (\Muinon\vo;illh  r. 
Stnuiiard  (^il  i'omp;in\  .  rh(>  «h>t\Mul:m(  \>  as  ;i  «'or|>«M;it  i«>n 
t\(  l^luo,  with  !»uth»Mi(v  to  manulMrluro  |>oht>hMnu  or  its 
jUHuliiots.  It  l>!i«i  »H*ooi\t<»l  n»>  sporiiil  nuthoritv  (ro\\\  ti»o 
^>tJ>to  of  PonnsvlvMuiii  to  trnns;»«M  husinoss  within  its  juris- 
dii'tion,  ln>t  it  hi>Uij;l»t  onuh^  potroloumin  that  Slalo  throiivjh 
biH>kors  i\\u\  shippoil  it  to  its  nMiiuM'ios  oiilsiiit*  oi'  thoSlnto. 
l'>urit\ii  tho  voars  IvSViMo  ISSO  it  owiuhI  iiitorosls  in  iiiili- 
viviuai  partnorships  doiuiv  business  in  ronnsvhania  as  pn>- 
duwrs,  ivti»\ors  or  transpovtors  of  oil.  It  i>wnotl  sonio 
«^haivs  of  st ooU  in  Poitnsvlvania  corporations,  anii  also  had 
httorosts  in  liniittnl  {vart>\iMships  in  tho  saino  bnsimvss  in 
ditYonM\t  parts  of  thai  Slato.  Hurinj;  those  voars  it  had 
tUvlarod  iii\iihMi^is  np«Mt  its  ontiro  proport  v  in  amiont  o(  tho 
8t.ato  oxoooiiinii"  tho  aino»u\t  o(  its  ni>nrinal  capital  stook. 
Tho  OOU  rt  hold'  that.uiulor  \\\o  ronnsvlvaniast^atnto  roijuir- 
inii'  ftMviji'n  oorporatii^ns  doinjj  business  in  tho  Stato  to  pav 
rt  tax  upon  thoir  capital  stock,  tho  ownership  of  tho  sh;iivs 
of  stock  in  a  ron»tsvlv:>j\ia  ct>rpin'ation  and  t>f  interests  in 
tho  Utnit<Hl  partnerships  aj\d  the  purchases  of  oil  through 
bivkoi^s  did  not  constitute  doiuji"  business  in  Ponnsvlvania 
so  as  to  subject  defendnut  to  tax:>tion  under  that  statute. 

§  \Ti>.   "What  is '•  aoinsi  business  ••  In  St^ito. 

("in  tho  othor  hand,  it  was  held  in  tho  case  last  citod  that 
tho  holdiuij  of  parfihrshtp  infctrnta  in  Pennsylvania  part- 
t}a\<hif\<  and  direct Iv  sharinij  in  tho  protits  did  const itnt« 
doing  bnsii\oss  within  tho  State. 

^  Oonimonwealth  r.  Tho  StsHiulard  Oil  Ov^.,  101  Pa.  119;  also  Shepp  v. 
TractlouOo.,  17  Moni^^mory  Law  Kep.  53. 


§    17i)     ISTATK    TAXATION    OF    FOREIGN    CORPORATIONS.         191 

All  illusdativo  case  as  to  what  constitutes  doing  business 
was  decided  in  the  United  States  Circuit  Courtin  New  York.^ 
There  a  Now  Jersov  corporation  liad  its  sales  agency  and 
office  in  Now  York  City,  but  its  plant  and  factoiy  in  an- 
other State.  It  was  held  to  be  "  doing  business  "  in  New 
York,  within  the  meaning  of  the  statute  of  that  State  im- 
posing a  tax  upon  the  corporate  franchise  of  any  foreio-n 
corporation  doing  business  in  the  State.  The  court  said, 
referring  to  the  decisions  of  the  New  York  Court  of  Ap- 
jieals  irt  the  construction  of  the  same  statute:"-  '*  ai)plving 
thcin  to  the  present  case,  the  occasional  retining  of  oil  in 
New  York  and  the  occasional  storage  of  products  in  advance 
of  sales  there  by  complainant,  without  more,  would  not 
constitute  doing  business  here.  *  *  *  g^it  a  foreign 
corporation  which  establishes  a  business  domicile  here  and 
brings  its  pro[)crty  within  the  jurisdiction,  and  mingles  it 
with  the  general  mass  of  coninicrcial  capital,  is  taxable 
here."  The  statute  meant,  by  "doing  business  within 
the  State,"  using  the  State  as  a  business  domicile  for  trans- 
acting any  substantial  ivirt,  even  though  a  comparatively 
small  part,  of  the  bus'iness  which  the  c(unp;iny  was  organ- 
ized to  carry  on  and  in  which  its  capital  was  embarked. 
The  court  C(uichuled,  i>age  '21 :  — 

"  It  would  seem  that  ii  manufacturing  company  which 
maintains  an  established  location  here,  and  an  agent,  for  the 
purpose  of  selling  its  products  or  facilitating  their  sale,  car- 
ries on  a  part  of  its  ordinary  business  here,  and  has  a  busi- 
ness domicile  here;  aud  if  it  keeps  funds  here  for  maintain- 


1  Southern  Cotton  Oil  Co.  v.  Weinple,  44  Fed.  Rep.  24.  In  People  ex 
rel.  Southern  Hotel  Co.  r.  Womple,  131  N.  Y.  G4,  the  New  York  Court  of 
Appeals  made  the  same  ruling  as  to  the  same  corporation,  saying  that 
the  tax  was  not  imposed  upon  the  property,  but  upon  the  privilege  of 
doing  business  in  the  State  as  a  corporation. 

"  People  V.  Trust  Co.,  9(3  N.  Y.  387;  People  v.  Mlnins  Co.,  105 
N.  Y. 7G. 


192         STATE    TAXATION    OF   FOREIGN   CORPORATIONS.    §    180 

ing  its  place  of  business,  and  to  enable  it  to  carry  on 
the  operations  of  its  agent,  such  a  foreign  company  would 
seem  to  be  taxable  under  the  statute,  dertairdy  it  cannot 
matter  that  the  volume-of  business  done  is  small,  or  that 
the  location,  instead  of  being  a  warehouse  or  a  shop,  is  an 
office  or  a  sample  room.''^ 

In  this  case  the  corporation  had  done  no  business  of  any 
kind  in  the  State  of  New  York  except  keeping  this  sales 
agency  and  office,  and  the  proceeds  of  sale  were  sent 
to  the  Philadelphia  office,  or  deposited  in  bank  subject  to 
the  draft  of  that  office,  excepting  only  a  small  bank  account 
of  some  $2,500  kept  in  New  York  for  office  expenses.  The 
court  said  that  the  case  was  not  free  from  doubt,  but  their 
conclusion  was  that  the  tax  was  authorized  by  the  statute. 

A  foreign  pipe  line  company,  laj'ing  pipes  in  a  State, 
and  having  pumping  stations,  storage  tanks,  distributing 
apparatus  and  a  branch  business  office  in  the  State  was  held 
in  New  Jersey  to  be  "  doing  business  "  in  the  State,  and  sub- 
ject to  a  corporate  franchise  license  for  the  privilege. ^ 

§  180.  "  Doing  business  "   by  bolding  interest  in  limited 
partnership. 

The  Supreme  Court  of  Pennsylvania,  in  the  Standard 
Oil  Company  case,  supra ^  §  178,  ruled  that  the  ownership 
of  shares  in  a  limited  partnership  in  that  State  did  not  con- 
stitute doing  business  by  a  foreign  corporation  under  the 
statute  of  that  State.  It  was  held  however  by  the  New 
York  Court  of  Appeals,  construing  the  statute  of  New  York, 
that  the  tax  was  properly  imposed  in  that  State  upon  a  cor- 
poration organized  in  Germany,  which  had  become  a  special 
partner  with  an  investment  of  $150,000  in  a  hmited  part- 
nership in  New  York,  the  latter  being  sole  agent  for  the 


4  See  also  infra,  §  181. 

2  Tide  Water  Pipe  Co.  v.  Assessors,  57  N.  J.  L.  516. 


§  182     STATE    TAXATION    OF   FOREIGN    CORPORATIONS.         193 

sale  of  its  products  in  this  country.^  It  was  decided  that 
the  foreign  corporation  was  taxable  upon  the  amount  of  its 
contributed  capital  stock  employed  in  the  State  of  New 
York.  The  court  declared  that  it  considered  the  statute  in 
the  light  of  the  public  policy  of  the  State  and  looked 
throuojhthe  form  at  the  substance.  It  said  of  the  foreio-n 
corporation:  "  It  has,  in  effect,  b}^  this  method  of  a  limited 
partnership  established  a  place  within  this  State  for  the 
doing  of  a  part  of  its  business,  and  though  I  come  to  the 
conclusion  with  some  hesitation,  I  think  that  it  may  be  re- 
garded as  coming  within  the  operation  of  the  statute." 

§  181.  Must  liave  business  domicil  in  State. 

The  foreign  corporation  therefore  must  establish  a  busi- 
ness domicil  of  some  sort  in  the  State  before  it  can  become 
subject  as  a  corporation  to  the  taxing  laws  of  the  State  by 
reason  of  "  carrying  on  business  "  therein.  It  may  have 
property  in  the  State  which  is  taxable  as  property,  but 
neither  the  ownership  of  such  property,  nor  the  relation 
of  stockholder,  patent  licensor,  nor  creditor  to  a  domestic 
corporation,  constitutes  "  carr^^ing  on  business"  in  the 
State  unless  it  has  a  business  domicil  in  the  State,  a  sales 
agency,  manufacturing  plant,  distribution  warehouse  or  an 
interest  in  a  domestic  partnership.  It  must  in  some  way 
establish  a  place  within  the  State  for  doing  some  part  of  its 
corporate  business. 

§  182.  Corporations  engaged  in  Federal  business. 

While  the  States  can  thus  levy  eyen  a  discriminating  tax 
upon  foreign  corporations  engaged  in  doing  business  in  the 
.  State,  they  cannot  exclude  corporations  engaged  directly 
in  the  business  of  the  Federal  government,  nor  can  they 

1  People  ex  rel.  v.  Roberts,  152  N.  Y.  59,  O'Brien,  J.,  dissenting. 


194        STATE   TAXATION    OF   FOREIGN    CORPORATIONS.     §    183 

impose  any  license  charge  or  other  tax  in  consideration  of 
permitting  such  corporation  to  do  business  in  the  State. 
They  may  however  tax  property  actually  employed  in  such 
business  equally  with  other  property  of  the  same  class  in 
the  State.  Thus  the  Supreme  Court  said  in  Pembina  Min- 
ing Co.  t;.  Pennsylvania,  supra,  §  165 :  — 

"And  undoubtedly  a  corporation  of  one  State,  em- 
ployed in  the  business  of  the  general  government,  may 
do  such  business  in  other  States  without  obtaining  a  license 
from  them.  Thus,  to  take  an  illustration  from  the  opinion 
of  Mr.  Justice  Bradley  in  a  case  recently  decided  by  him, 
'  if  Congress  should  employ  a  corporation  of  ship  builders 
to  construct  a  man-of-war,  they  would,  have  the  right  to 
purchase  the  necessary  timber  and  iron  in  any  State  of  the 
Union,'  and,  we  may  add,  without  the  permission  and 
against  the  prohibition  of  the  State.  Stockton  v.  Balti- 
more and  New  York  Eailroad  Co.,  32  Fed.   Eep.    9,  14." 

§  183.  Corporations  engaged  in    "  carrying-  on  interstate 
coniuierce." 

In  one  sense  all  commercial  business  between  citizens  of 
different  States  is  interstate  commerce.  The  manufacturer, 
who  ships  his  goods  to  a  purchaser  in  another  State,  is 
engaged  in  interstate  commerce.  But  in  this  connection 
the  term  ' '  carrying  on  interstate  commerce ' '  has  a  peculiar 
and  technical  meaning,  which  limits  it  to  corporations 
actually  engaged  in  carrjdng  on  interstate  commerce,  that 
is,  common  carriers  and  others,  who  afford  the  facilities 
whereby  commerce  is  carried  on  between  the  States.  Thus 
aU  public  carriers,  railroads,  steamboats,  telegraph  or  tele- 
phone companies,  bridge  and  ferry  companies,  are  carry- 
ing on  interstate  commerce  in  this  sense.  The  State  can 
neither  exclude  corporations  of  this  class,  actually  engaged 


§  184    STATE   TAXATION   OF   FOREIGN   CORPORATIONS.         195 

in  interstate  commerce,  nor  can  it  impose  any  conditions 
upon  the  transaction  of  their  business  in  the  State.  A 
raih-oad  or  telegraph  company  opening  an  office  in  the 
State  for  its  business  and  a  manufacturing  corporation, 
which  establishes  there  a  sales  office  or  a  sales  ao-ency,  are 
both,  broadly  speaking,  engaged  in  interstate^ business, 
but  in  a  different  sense.  The  latter  can  be  taxed  by  the 
State  for  the  privilege  or  excluded,  the  former  cannot. 

It  has  been  shown  i  that  insurance  companies  are  not 
engaged  in  interstate  commerce,  and  can  therefore  estab- 
lish agencies  in  the  State  only  by  its  consent,  and  subject 
to  such  conditions  as  it  may  impose  upon  foreign  corpo- 
rations wishing  to  do  business  in  its  jurisdiction. 

§  184.  Corporations  carrying  on  interstate  commerce  not 
exempt  from  charges  for  privilege  of  incorpo- 
ration. 

But  this  exemption  of  corporations,  e.  g.,  railroad  com- 
panies, engaged  as  instrumentalities  of  interstate  commerce, 
from  discriminating  State  taxation  and  conditions  imposed 
upon  the  privilege  of  entering  a  State,  does  not  include 
exemption  from  charges  for  the  privilege  of  incorporatino- 
under  the  laws  of  a  State.  This  was  illustrated  in  an  in- 
teresting case  from  Ohio.  The  Wabash  Eailroad,  as  re- 
organized after  foreclosure,  being  a  consolidation  of  com- 
panies existing  under  the  laws  of  Ohio,  Michigan,  Indiana, 
Illinois  and  Missouri,  wished  to  file  its  articles  .of  consolida- 
tion under  the  laws  of  Ohio,  as  it  had  in  other  States.  Its 
aggi'cgate  capitalization  was  fifty-two  million  dollars,  and 
the  State  insisted  on  one-tenth  of  one  per  cent  of  the  en- 
tire stock  as  the  fee  for  incorporation  under  the  Ohio  law, 
making  the  sum  of  fifty-two  thousand  dollars.  The  com- 
pany offered  to  pay  seven  hundred  dollars,  being  one-tenth 

1  Supra,  §  147. 


196         STATE   TAXATION   OF  FOREIGN   CORPORATIONS.    §   184 

of  one  per  cent  on  the  capital  stock,  amounting  to  only 
seven  hundred  thousand  dollars,  of  the  only  Ohio  corpora- 
tion which  went  into  the  consolidation.  They  claimed  that 
this  charge  of  fifty-two  thousand  dollars  was  an  attempt  on 
the  part  of  Ohio  to  lay  a  burden  on  commerce  and  to  give 
extra-territorial  force  to  its  taxing  power.  But  the  Supreme 
Court  held  ^  that  it  was  for  the  State  of  Ohio  to  determine 
what  conditions  it  would  annex  to  the  privilege  of  incorpora- 
tion under  its  laws ;  that  the  purpose  of  tendering  the  articles 
to  the  Secretar}'-  of  State  was  to  secure  to  the  consolidated 
company  certain  powers,  immunities  and  privileges  which 
appertained  to  a  corporation  under  the  laws  of  Ohio ;  that 
the  State  in  granting  corporate  privileges  to  its  own  citi- 
zens, or  what  was  equivalent  thereto,  permitting  foreign 
corporations  to  become  constituent  elements  of  a  consol- 
idated corporation  organized  under  its  laws,  could  impose 
such  conditions  as  it  deemed  proper;  and  that  this  incor- 
poration fee  involved  no  interference  with  interstate  com- 
merce or  taxation  of  property  beyond  the  limits  of  the 
State. 

1  Ashley  v.  Ryan,  153  U.  S.  436. 


CHAPTER  YI. 

REGULATION  OF  COMMERCE  — THE  TAXATION  OF  STEAM- 
BOATS AND  VESSELS. 

§  185.  Taxation  of  vessels  as  property. 

186.  Taxable  situs  of  steamboats  and  vessels  at  home  port. 

187.  Situs  not  affected  by  temporary  enrollment  as  coaster  elsewhere. 

188.  Steamboats  on  rivers  and  great  lakes. 

189.  Home  port  not  conclusive  as  to  situs  when  vessels  are  perma- 

nently and  exclusively  employed  elsewhere. 

190.  State  cannot  tax  privilege  of  navigating  public  waters. 

191.  Steam  tugs  cannot  be  taxed  for  privilege  of  navigating  rivers. 

192.  Police  control  by  State  over  vessels  in  harbor  or  in  transit. 

193.  Power  of  State  to  license  oyster  boats  and  fisheries. 

194.  State  may  exact  tolls  for  using  rivers  and  harbors  improved  at  its 

own  cost. 

195.  Taxation  of  ferries  and  bridges. 

196.  Gloucester  Ferry  Co.  v.  Pennsylvania. 

197.  Taxation  of  interstate  bridges. 

198.  Taxation  of  interstate  bridge  not  interference  with  interstate  com- 

merce. 

199.  Taxation  of  tonnage. 

200.  Property  taxation  and  compensation  for  services  distinguished 

from  tonnage. 

201.  Supreme  Court  on  tonnage  duties  and  wharfage  charges. 

202.  Wharfage  charges  may  be  graduated  by  tonnage. 

203.  But  wharfage  and  similar  charges  must  be  without  discrimination. 

204.  Quarantine  and  pilotage  charges. 

"  No  State  shall,  without  the  consent  of  Congress,  lay  any  duty  of 
tonnage." 

Constitution  of  the  United  States,  Article  1,  Sec.  10,  Par.  3. 

§  185.  Taxation  of  vessels  as  property. 

The  taxation  of  steamboats  and  other  vessels  navio-atino- 
the  public,  that  is  the  navigable  waters  of  the  United 
States, — those  which  by  themselves  or  in  connection  with 
other  waters  form  a  continuous  channel  for  commerce  be- 

(197) 


198  TAXATION   OF   STEAMBOATS,    -NT^SSELS,    ETC.         §   186 

tween  tlie  States  or  with  foreign  nations,  —  has  a  direct  rela- 
tion to  the  regulation  of  such  commerce,  and  the  taxing 
power  of  the  State  is  therefore  limited  not  only  by  the 
specific  prohibition  in  the  Constitution  against  levying  any 
tax  upon  tonnage,  but  also  by  the  necessity  of  not  inter- 
fering with  the  paramount  control  over  commerce  vested 
in  Congress. 

Steamboats  and  other  vessels  employed  upon  waters  en- 
tirely within  the  jurisdiction  of  the  State  and  having  no 
water  connection  with  other  States  or  foreign  countries, 
are  taxable  like  other  property  within  the  jurisdiction  of 
the  State,  and  no  Federal  question  is  involved  in  such  tax- 
ation. But  when  they  are  employed  in  interstate  or 
foreign  commerce,  the  taxing  power  of  the  State  is  limited, 
both  as  to  the  place  and  manner  of  taxation,  so  that  they 
can  only  be  taxed  where  they  have'  a  taxable  situs.  Any 
attempted  taxation  in  other  places  is  void  as  an  interfer- 
ence with  commerce,  and  while  they  can  be  taxed  at  their 
situs  as  property,  no  tax  can  be  laid  upon  tonnage. 

§  186.  Taxable  situs  of  steamboats  and  vessels  at  home 
port. 

Steamboats  and  vessels  navigating  the  public  or  navi- 
gable waters  of  the  United  States  are  taxable  as  property, 
irrespective  of  the  residence  of  the  owners,  in  the  home  port 
of  the  vessels,  which  is  said  to  be  their  situs  f  ortaxation.  Thus 
the  steamers  of  the  Pacific  Mail  Steamship  Company  owned 
by  a  New  York  corporation,  registered  at  the  custom  house 
in  New  York,  and  employed  in  transporting  passengers  and 
freight  between  Panama  and  San  Francisco,  had  no  taxable 
situs  in  San  Francisco.^     The  court  said :  — 

"  Our   merchant  vessels  are  not  unfrequently  absent  for 

1  Hays  V.  Pacific  Mail  Steamship  Co.,  17  Howard,  596 ;  see  also  Trans- 
portation Co.  V.  "Wheeling,  99  U.  S.  273. 


§   187        TAXATION   OF    STEAMBOATS,    VESSELS,    ETC.  199 

years  in  the  foreign  carrying  trade,  seeking  cargo,  caiTving 
and  unlading  it  from  port  to  port,  during  all  the  time 
absent ;  but  they  never  lose  their  national  character  nor 
their  home  port,  as  inscribed  upon  their  stern. 

"  The  distinction  between  a  vessel  in  her  home  port  and 
when  lying  at  a  foreign  one,  or  in  the  port  of  another 
State  is  familiar  in  the  admiralty  law.  She  is  subjected  in 
many  cases  to  the  application  of  a  different  set  of  principles. 
7  Pet.  324;  4  Wheat.  438. 

"  We  are  satisfied  that  the  State  of  California  had  no 
jurisdiction  over  these  vessels  for  the  purpose  of  taxation, 
the}^  were  not,  properlv,  abiding  within  its  limits,  so  as  to 
become  incorporated  with  the  other  personal  proj)erty  of 
the  State ;  they  were  there  but  temporarily,  engaged  in  law- 
ful trade  and  commerce,  with  their  situs  at  the  home  port, 
where  the  vessels  belonged,  and  Avhere  the  owners  were 
liable  to  be  taxed  for  the  capital  invested,  and  where  the 
taxes  had  been  paid." 

§  187.  Situs     not   affected    by    temporai-y   enrollnient  as 
coaster  elsewhere. 

The  fact  that  a  vessel  enrolled  in  one  State  at  the  port 
nearest  where  her  owner  usually  resides  is  enrolled  as  a  coaster 
at  a  port  in  another  State,  where  sheisemploj^edas  one  of  a 
daily  line  of  steamers  between  that  port  and  a  port  in  a  third 
State,  does  not  cause  her  to  become  incorporated  in  the  per- 
sonal property  of  the  State  in  which  she  is  thus  enrolled  as  a 
coaster.  The  fact  that  the  vessel  was  phj'sically  within  the 
limits  of  the  State  at  the  time  the  tax  was  levied  did  not 
decide  the  question  any  more  than  his  physical  presence 
would  decide  it  in  case  of  a  traveler  passing  through  with 
his  private  carriage.^ 

The  ferry  boats  operating  between  St.  Louis  and  East  St. 

1  Morgan  v.  Parham,  16  Wallace,  477. 


200  TAXATION   OF   STEA3IBOATS,    VESSELS,    ETC.        §    188 

Louis  belonged  to  an  Illinois  corporation,  and  though  en- 
rolled in  the  city  of  St.  Louis,  when  not  in  actual  use,  were 
laid  up  on  the  Illinois  shore.  They  were  held  to  have  no 
taxable  situs  as  property  in  St.  Louis. ^  It  was  said  in  this 
case  that  the  home  port  of  the  vessel  under  the  United 
States  Eegistry  Laws,  declaring  the  home  port  shall  be  that 
at  or  near  which  her  owner  resides,  depends  wholly  upon 
the  locality  of  the  owner's  residence,  and  not  upon  the 
jDlace  of  the  enrollment.  The  purpose  in  this  case^  said  the 
court,  was  not  to  tax  the  property  through  the  proprietor, 
but  to  tax  the  propert}^  itself  by  reason  of  its  being  "  within 
the  city,"  and  the  boats  were  not  "in  the  city  "  within 
the  meaning  of  the  statute. 

§  188.   Steamboats  on  rivers  and  Great  Lakes. 

Steamboats  owned  by  a  West  Virginia  company  having 
its  principal  office  in  Wheeling,  plying  between  different 
ports  on  theOhioEiver,  were  properW  taxable  b}'"  the  State 
of  West  Virginia  in  Wheeling  on  their  value  as  personal 
property,  under  a  statute  authorizing  that  city  to  assess  and 
collect  an  annual  tax  for  the  usq  of  the  State  on  personal 
property  within  its  precincts. ^  It  was  said  that  the  State 
could  not  tax  ships  as  the  instruments  of  commerce,  but 
could  tax  the  owners  for  their  interest  in  them  as  personal 
property. 

Thus  steamers  and  vessels  employed  on  the  great  lakes, 
having  the  name  of  their  home  port  and  the  city  of  their 
owner's  domicil  painted  thereon,  as  required  by  the  United 

1  St.  Louis  V.  Wiggins  Ferry  Co.,  11  Wall.  423,  on  appeal  from  the 
U.  S.  Circuit  Court.  In  another  case  the  Supreme  Court  of  Missouri 
had  held  the  boats  taxable  in  St.  Louis,  St.  Louis  v.  Wiggins  Ferry  Co., 
40  Mo.  580.  As  to  the  home  port  of  a  vessel  under  these  decisions,  see 
The  Lotus  No.  2,  26  Fep.  Rep.  637.  See  also  2  Dillon's  Municipal 
Corporations,  4th  Ed.,  Sec.  786  et  seq.  and  cases  cited. 

2  Transportation  Co.  v.  Wheeling,  99  U.  S.  273. 


§  189        TAXATION   OF    STEAJIBOATS,    \^SSELS,    ETC.  201 

States  Revised  Statutes,  Section  4178,  have  their  situs 
for  the  purposes  of  taxation  at  their  home  port,  and  cannot 
be  taxed  as  property  of  another  State. ^  Where  the  place 
of  enrollment  is  the  same  as  the  residence  of  the  owner, 
that  place  is  of  course  the  home  port  and  the  situs  for 
taxation.  Under  the  provision  of  the  Eegistrj  Laws  re- 
ferred to  above,  that  port  will,  as  a  rule,  be  the  place  of 
State  taxation,  and  it  would  seem  that  the  same  port,  the 
place  of  enrollment,  would  be  the  situs  for  taxation,  even 
if  one  or  more  of  the  part  owners  reside  elsewhere."'^ 

§  189.  Home  port,  when   not  conclusive  as  to  situs. 

It  has  been  held  in  a  recent  case  in  a  State  court,  thouofh 
the  question  does  not  seem  to  have  been  definitely  decided 
by  the  United  States  Supreme  Court,  that,  while  the  place 
of  enrollment  is  presumptive  evidence  of  situs  for  taxation, 
it  is  not  conclusive.  Ocean-going  tug-boats  were  declared 
subject  to  taxation  by  the  State  of  Washington,  because 
they  were  used  exclusively  in  the  waters  of  that  State, 
although  they  were  registered  and  owned  in  the  State  of 
California.^     The  Court  said  in  that  case,  1.  c.  page  215  :  — 

*'  Sound  reasons  exist  far  the  right  of  the  State  to  tax 
these  vessels  that  are  permanently  here  transacting  local 
business.  They  receive  the  full  protection  of  the  local 
government,  and,  if  mere  registry  in  another  port  is  con- 
clusive against  the  right  to  tax  here,  a  boat  can  operate  in 
our  local  waters,  confined  entirely  to  local  business,  and, 
if  owned  elsewhere,  may  evade  all  taxation  in  this  State. 
Such  construction  should  not  be  adopted  unless  impera- 
tively demanded  by  superior  authority.    Under  the  revenue 

1  Yost  V.  Lake  Erie  Transportation  Co.,  6th  Circuit,  112  Fed.  Rep.  746. 

2  See  2  Dillon  on  Municipal  Corporations,  Sec-  786  et  seq.  and  cases 
cited. 

3  Northwestern  Lumber  Co.  v,  Chehalis  County  (Wash.),  64  L.  R.  A. 
212.     See  also  National  Dredging  Co.  v.  State,  99  Ala.  462. 


202  TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.         §   190 

law  of  this  State,  personal  property  is  taxed  at  its  situs, 
and  without  reference  to  the  residence  of  the  owner." 

And  it  was  also  said,  quoting  from  the  Supreme  Court 
of  Alabama :  — 

"  The  question  indeed  is  at  last  one  of  situs  in  fact,  and 
where  this  is  shown  neither  foreign  registry  nor  foreign 
ownership  is  of  any  consequence." 

It  was  held  however  by  the  Supreme  Court  of  Florida, 
that  steamboats  belonging  to  a  New  York  company  and 
registered  in  New  York,  employed  during  the  winter  season 
on  the  St.  John's  Eiver,  but  during  the  remainder  of  the 
year  in  such  waters  as  would  be  most  profitable  in  other 
parts  of  the  country,  were  not  taxable  in  Florida.  The 
court  said :  — 

"  We  do  not  say  that  registration  in  a  foreign  port  and 
non-resident  ownership  should  control  absolutely.  But 
such  ownership  and  registration  render  them  primarily  and 
presumptively  taxable  only  in  their  home  port."  ^ 

§  190.  State    cannot    tax  privilege  of  navigating  public 
waters. 

The  power  of  the  State  is .  limited  to  tlft  taxation  of 
boats  and  other  instrumentalities  of  commerce  as  property. 
Thus  a  municipal  ordinance  of  the  city  of  New  Orleans,  im- 
posing a  license  on  the  business  of  running  tug  tow-boats  to 
and  from  the  Gulf  of  Mexico,  was  an  attempted  regulation 
of  commerce  and  invalid. ^  The  Supreme  Court  said  that  it 
is  undoubtedly  true,  as  has  often  been  judicially  declared, 
that  vessels  engaged  in  foreign  and  interstate  commerce 
and  duly  enrolled  and  licensed  under  the  Acts  of  Congress 
may  be  taxed  by  State  authority  as  property,  provided 
the  tax  is  not  a  tonnage  duty  and  is  levied  only  at  the  port 

1  Johnson  v.  De  Bary-Baya  Merchants'  Line,  37  Fla.  499,  37  L.  R.  A. 
518. 
2  Moran  v.  New  Orleans,  112  U.  S.  69. 


§    190        TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  203 

of  registry,  and  the  vessels  are  valued  like  other  property 
in  the  State,  without  unfavorable  discrimination  on  account 
of  their  employment.     It  added,  p.  75  :  — 

"  The  sole  occupation  sought  to  be  subjected  to  the  tax 
is  that  of  using  and  enjoying  the  license  of  the  United 
States  to  employ  these  particular  vessels  in  the  coasting 
trade;  and  the  State  thus  seeks  to  burden  with  an  exaction, 
fixed  at  its  own  pleasure,  the  very  right  to  which  the  plain- 
tiif  in  error  is  entitled  under,  and  which  he  derives  from, 
the  Constitution  and  laws  of  the  United  States.  The 
Louisiana  statute  declares  expressly  that  if  he  refuses  or 
neglects  to  pay  the  license  tax  imposed  upon  him,  for  using 
his  boats  in  this  way,  he  shall  not  be  permitted  to  act  under, 
and  avail  himself  of  the  license  granted  by  the  United  States, 
but  may  be  enjoined  from  so  doing  by  judicial  process. 
The  conflict  between  the  two  authorities  is  direct  and  ex- 
press. What  the  one  declares  may  be  done  without  the 
tax,  the  other  declares  shall  not  be  done  except  upon  pay- 
ment of  the  tax.  In  such  an  opposition,  the  only  question 
is,  which  is  the  superior  authority ;  and  reduced  to  that,  it 
furnishes  its  own  answer." 

The  principle  is  the  same,  whether  the  vessels  are  owned 
by  a  home  or  a  foreign  corporation.  Thus  a  foreign  corpo- 
ration, whose  vessels  while  en  route  between  the  ports  of  two 
different  States  stop  at  the  port  of  a  third  State,  is  not 
liable  at  that  port  for  a  license  tax,  because  it  there  leases  a 
wharf  or  landing,  and  has  a  plant  and  machinery  for  the 
taking  on  and  discharge  of  its  freight  and  passengers,  em- 
ployees, an  agent,  a  bank  account  and  an  office,  and 
occasionally  purchases  supplies.  All  such  operations  are 
an  essential  and  integral  part  of  interstate  business,  and  the 
State  cannot  impose  a  tax  upon  the  privilege  of  conducting 
such  business.^ 

1  Clyde  S.  S.  Co.  v.  City  Council  of  Cliarleston,  76  Fed.  Rep.  46. 


204  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.         §    191 

§  191.    Steam  tugs  cannot  be  taxed  for  privilege  of  navi- 
gating*  rivers. 

The  same  principle  has  been  applied  by  the  Supreme 
Court  to  steam  tugs  engaged  in  the  business  of  towing 
vessels  into  and  out  of  the  Chicago  river  and  harbor  from 
and  to  the  lake.  They  were  engaged  in  interstate  and 
foreiarn  commerce,  their  business  could  not  be  distin- 
guished  from  that  in  which  the  vessels  towed  were  engaged, 
and  they  could  not  be  compelled  to  pay  a  license  fee  to  the 
city  of  Chicago.^  It  was  also  immaterial  that  the  Chicago 
river  had  been  deepened  for  navigation  purposes  by  dredg- 
ino-,  under  the  direction  and  at  the  expense  of  the  cit}',  for 
the  license  was  not  exacted  as  ti  toll  for  the  specific  pur- 
pose of  improving  the  river,  and  the  case  therefore  chd  not 
come  within  the  principle  of  those  decisions  which  hold 
that  'a  tax  or  toll  levied  by  a  State  upon  those  using  its 
rivers  and  harbors  improved  at  its  own  cost  is  not  in  viola- 
tion of  the  Federal  Constitution.'^  The  opinion,  referring 
to  one  of  these  cases,  Sands  v.  Manistee  Eiver  Improve- 
ment Co.,  infra,  §  194,  said,  page  412 :  — 

"  When  the  case  came  before  this  court  it  was  held  that 
the  internal  commerce  of  a  State,  that  is,  the  commerce 
which  is  wholly  confined  within  its  limits,  is  as  much  under 
its  control  as  foreign  or  interstate  commerce  is  under  the 
control  of  the  general  government,  and,  to  encourage  the 
growth  of  that  commerce  and  render  it  safe.  States  might 
provide  for  the  removal  of  obstructions  from  their  rivers 
and  harbors  and  deepen  their  channels  and  improve  them 
in  other  ways,  and  levy  a  general  tax  or  toll  upon  those 
who  use  the  improvements  to  meet  their  cost,  provided  the 
free  navigation  of  the  waters,  as  permitted  by  the  laws  of 

1  Harmaa  v.  City  of  Chicago,  U7  U.  S.  396,  reversing  140  111.  374.  See 
also  Frere  v.  Von  Schoeler,  47  La.  Ann.  324. 

2  Sands  v.  Manistee  River  Impt.  Co.,  123  U.  S.  288;  Huse  v.  Glover, 
119  U.  S.  543,  infra,  §  194. 


§   192       TAXATION   OF   STEAIVIBOATS ,    VESSELS,    ETC.  205 

the  United  States,  was  not  impaired,  and  provided  any 
system  for  the  improvement  of  their  navigation  instituted 
by  the  general  government  was  not  defeated.  No  legisLi- 
tion  of  Congress  was,  by  the  statute  of  Michigan,  in  that 
case  interfered  with,  nor  any  right  conferred,  under  the 
legislation  of  Congress,  in  the  navigation  of  the  river  by 
licensed  or  enrolled  vessels,  impaired,  defeated  or  burdened 
in  any  respect.  It  was  the  improvement  of  a  river  wholly 
within  the  State,  and,  therefore,  until  Congress  took 
action  on  the  subject,  wholly  under  the  control  of  the 
authorities  of  the  State." 

§  192.  Police  control  by  State  over  vessels  in  harbor  or 
in  transit. 

The  police  control  of  the  State  or  of  a  municipality 
acting  under  State  authority  is  co-extensive  with  its  juris- 
diction. Pilot  and  harbor  regulations,  when  not  in  conflict 
with  the  Federal  Constitution  or  Federal  regulation,  are 
valid.  But  vessels  in  transit  are  not  within  the  jurisdiction 
of  the  State  so  as  to  be  subject  to  the  local  license  taxes, 
as  for  selling  liquors  on  board. ^  Police  regulations  how- 
ever licensing  and  regulating  public  exhibitions  on  board 
steamboats  in  the  harbor  ^  have  been  held  valid  as  police 
regulations  and  not  invalid  as  regulations  of  commerce.^ 

In  Kentucky  a  license  tax  upon  any  person  residing  upon 
a  boat  in  a  navigable  river  was  held  valid.*     The  court  said 

1  state  V.  Frappart,  31  La.  Ann.  340. 

2  A  city  ordinance  exacting  a  license  from  boats  in  tlie  Mississippi 
river  was  held  invalid  as  to  a  tow-boat  licensed  under  Act  of  Congress 
in  the  coasting  trade,  St.  Louis  v.  Coal  Co.,  158  Mo.  342.  For  earlier 
State  cases  sustaining  licenses  held  invalid  under  the  rule  in  Moran  v. 
New  Orleans,  supra,  §  190,  andHarmanv.  Chicago,  siipra,  §  191,  see  Chil- 
vers  V.  People,  11  Mich.  48;  Lightburne  v.  Taxing  District,  4  Lea  219; 
Newport  v.  Taylor,  16  B.  Monroe  699;  New  Orleans  v.  Eclipse  Towboat 
Co.,  33  La.  Ana.647. 

8  Board  of  Selectmen  v.  Spalding,  8  La.  Ann.  87. 

*  Robertson  v.  Commonwealth  of  Kentucky,  19  Ky.  Law  Kep.    442. 


206  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.         §   193 

in  that  case  that  plaintiff  had  no  right  to  use  the  public 
highway  except  in  common  with  the  public  and  in  pursu- 
ance of  the  purposes  of  its  dedication,  unless  by  consent  of 
the  government ;  that  the  waters  of  the  Ohio  were  within 
the  jurisdiction  of  Kentucky  and  the  statute  in  question 
was  justified  under  the  police  power. 

§  193.  Power   of  State   to  license  oyster  boats   and  fish- 
eries. 

Subject  to  the  paramount  right  of  navigation,  the  regu- 
lation of  which  has  been  granted  to  the  Federal  govern- 
ment, each  State  owns  the  beds  of  all  tide- waters  and 
public  waters  within  its  jurisdiction,  and  may  appropriate 
them  to  be  used  as  a  common  by  its  citizens.^  Thus  a 
State  may  provide  that  none  may  take,  plant  or  cultivate 
oysters  under  its  tidal  waters,  except  such  as  shall  be 
licensed,  and  may  confine  the  right  to  obtain  licenses  to  its 
own  citizens. 2  But  a  statute  prohibiting  the  use  of  vessels 
to  buy  oysters  on  Chesapeake  Bay,  unless  under  license" 
obtained  from  the  State  conditioned  upon  a  twelve  months 
residence  therein  and  payment  of  a  tonnage  fee,  was  un- 
constitutional on  the  double  ground  that  it  denied  to  citizens 
of  other  States  the  privileges  enjoj^ed  by  citizens  of  that 
State  and  that  it  imposed  a  tonnage  tax.^  A  license  fee 
however  of  three  dollars  per  ton,  required  from  every  vessel 
employed  in  dredging  for  oysters  within  the  waters  of  the 
State  was  held  a  valid  exercise  of  the  State's  proprietary 
rights.*  A  vessel  enrolled  and  licensed  under  the  laws  of 
the  United  States  is  not  on  that  account  exempt  from  such 


1  McCready  v.  Virginia,  94  U.  S.  391. 

2  State  V.  Corson,  65  N.  J.  L.  502,  50  Atl.  Rep.  780. 

3  Booth  V.  Lloyd  (Md.),  33  Fed.  598. 

4  Dize  V.  Lloyd  (Md."),  36  Fed.  651;  State  v.  Loper,  46  N.  J.  L.  321; 
Morgan  v.  Commonwealth  (Va.),  98  Va.  812. 


§   194        TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.  207 

State  regulations.^  "The  right  which  the  people  of  the 
State  thus  acquire"  in  the  oyster  beds  and  fisheries 
"  comes  not  from  their  citizenship  alone,  but  from  their 
citizenship  and  property  combined,"  in  the  language  of  the 
Supreme  Court  in  McCready  v.  Virginia.  "It  is  in  fact  a 
property  right,  and  not  a  mere  privilege  or  immunity  of 
citizenship."  The  State  therefore  determines  the  condi- 
tions on  which  the  products  of  the  oyster  beds  and  fisheries 
become  subjects  of  commerce. 

§  194.  State  may    exact  tolls  for  using-  rivers   and  har- 
bors improved  at  its  own  cost. 

A  State  may  nuike  improvements  in  a  navigable  stream 
within  its  borders  and  collect  reasonable  toils  from  vessels 
as  a  compensation  for  using  the  improved  facilities.  This  prin- 
ciple was  first  apphed  by  the  Supreme  Court ^  in  holding  valid 
the  regulations  made  by  the  city  of  Chicago  for  the  use  of 
the  Chicago  river.  The  court  said  that,  until  Congress 
acted,  the  State  of  Illinois  had  plenary  authority  over  the 
bridges  across  the  river  and  could  vest  in  the  city  of 
Chicago  jurisdiction  over  the  construction,  repair  and  use 
of  such  bridges,  and  that  there  was  nothing  in  the  North- 
western Ordinance  of  1787  or  in  the  subsequent  legislation 
of  Congress,  which  precluded  the  State  from  exercising 
this  power. 

The  principle  was  further  applied  in  sustaining  the  right 
of  the  State  to  exact  tolls  from  vessels  passing  through  the 
Illinois  river,  which  had  been  improved  at  the  expense  of 
the  State. ^  Such  a  charge,  said  the  court,  was  not  a  duty 
upon  tonnage  but  was  analogous  to  a  charge  for  the  use  of 
wharves  and  docks  constructed  to  facilitate  the  landiua:  of 


"to 


1  Manchester  v.  Massachusetts,  139  U.  S.  240;  Smith  v,  Maryland,  18 
How.  269. 

*  Escanaba  Company  v.  Chicago,  107  U.  S.  678.- 

2  Huse  V.  Glover,  119  U.  S.  643. 


208  TAXATION    OF    STEAMBOATS,    TESSELS,    ETC.         §    194 

passengers  and  freight  and  taking  them  on  board  and  for 
the  repair  of  vessels.  In  this  case  the  rates  of  toll  were 
prescribed  according  to  the  tonnage  of  the  vessels  and  the 
amount  of  freight  carried  by  them  through  the  locks  of 
the  river.  The  court  said  that  this  was  simply  a  mode  of 
fixins:  the  rate  according  to  the  size  of  the  vessel  and  the 
amount  of  property  it  carried,  and  was  in  no  sense  a  duty 
upon  tonnage  within  the  prohibition  of  the  Constitu- 
tion. 

The  question  came  before  the  court  again  in  a  case  in- 
volving the  improvement  made  by  the  State  of  Michigan  in 
the  Manistee  river. ^  The  court  held  that,  as  the  Manistee 
river  was  wholly  within  the  limits  of  Michigan,  the  State 
could  authorize  any  improvement  which  in  its  judgment 
would  enhance  the  value  of  the  river  as  a  means  of  trans- 
portation from  one  part  of  the  State  to  another,  and  to 
meet  the  cost  of  such  improvement  the  State  could  levy  a 
general  tax  or  lay  a  toll  upon  all  who  used  the  river  and 
harbors  as  improved.  It  was  urged  that  the  terms  of  the 
Northwestern  Ordinance,  respecting  the  freedom  of  the 
navigable  waters  of  the  territory,  bound  the  people  of  the 
territory  when  subsequently  formed  into  States.  The 
court  replied  that,  although  it  was  doubtless  supposed  by 
the  framers  of  that  ordinance  that  its  words  would  alwaj's 
be  considered  a  binding  obligation,  yet,  from  the  very  con- 
ditions under  which  the  States  formed  from  its  territory 
were  admitted  into  the  Union,  the  provisions  of  the  ordi- 
nance became  inoperative  except  as  adopted  by  them. 
But,  independently  of  this  consideration,  nothing  in  the 
ordinance  prevented  the  State  from  improving  the  river 
and  charging  a  reasonable  toll  as  compensation  for  the  im- 
provement. 

1  Sands  ».  Manistee  River  Improvement  Co.,  123  U.  S.  288. 


§  195        TAXATION   OF    STEAMBOATS,    VESSELS,    ETC.  209 

§  195.  Taxation  of  ferries  and  bridges. 

The  establishment  and  licensing  of  ferries  ^  and  the 
establishment  of  bridsres  across  the  navio-able  waters  of  a 
State 2  are  within  what  is  termed  the  concurrent  jurisdiction 
of  the  State  and  Federal  governments  in  the  regulation  of 
commerce.  As  to  this  class  of  cases,  it  is  not  the  mere 
existence  of  the  power  but  its  exercise  by  Congress,  which 
is  incompatible  with  the  exercise  of  the  same  power  by  the 
States,  and  the  latter  may  legislate  in  the  absence  of  con- 
gressional legislation.  The  State  may  therefore  establish 
and  license  a  ferry  or  a  bridge  over  a  navigable  stream, 
though  the  latter  must  be  approved  by  Congress  as  being  a 
lawful  structure  not  interfering  with  navigation,  and  it  was 
held  by  the  Supreme  Court  in  a  recent  case^  that  Congress 
alone  possesses  the  requisite  power  to  regulate  charges 
upon  such  a  bridge. 

There  is  a  distinction  between  bridges  and  ferries  over 
navigable  rivers  which  separate  States  and  those  which  are 
wholly  within  the  limits  of  a  State,  as  Congress  has  no 
control  over  commerce  which  is  entirely  within  the  limits 
of  a  State.* 

Applying  the  principle  declared  in  the  cases  above  quoted, 
distinguishing  between  the  property  employed  as  instru- 
mentalities of  commerce  and  the  business  of  conductinor  the 
commerce  itself,  the  taxing  power  of  the  State  would  seem  to 


1  Conway  v.  Taylor,  1  Black  603. 

2  Cardwellw.  American  Bridge  Co.,  113  U.  S.  205;  Covington  Bridge 
Co.  V.  Kentucky,  154  U.  S.  204. 

3  Covington  Bridge  Co.  v.  Kentucky,  supra.  Four  judges  dissented, 
holding  that  the  States  had  the  power  to  regulate  tolls  both  on  bridges 
and  ferries,  subject  to  the  paramount  authority  of  Congress,  and  the 
failure  of  Congress  to  act  manifested  its  intention  that  the  rates  of  toll 
should  be  as  established  by  the  two  States,  in  the  case  of  an  interstate 
bridge. 

4  See  United  States  v.  Morrison,  Federal  Cases  No.  15,465;  but  see 
United  States  v.  Jackson,  Federal  Cases  No.  15,458. 

14 


210  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  §    196 

be  limited  in  the  taxation  of  bridges  and  ferries  to  the  taxa- 
tion of  the  property  employed  therein,  such  as  the  bridge 
and  approaches,  the  ferry-boats  and  other  property  of  the 
ferry.  The  Supreme  Court  sustained  however  ^  a  license 
of  a  certain  sum  for  each  boat  levied  by  the  city  of  East 
St.  Louis  upon  the  ferry  company,  saying  that  the  power 
*■  to  license  is  a  police  power,  although  it  can  also  be  used 
for  purposes  of  revenue,  and  that  the  exaction  of  the 
license  fee  b}'^  the  State  within  which  the  property  had  its 
sihis  was  not  a  regulation  of  commerce.  The  license  fee 
was  levied,  not  on  the  ferry-boat,  but  on  the  ferry-keeper. ^ 

§  196.  Gloucester  Ferry  Co.  v.  Pennsylvania. 

The  ferry-boats  between  Gloucester  in  New  Jersey  and 
the  city  of  Philadelphia  belonged  to  a  New  Jersey  company 
and  were  registered  in  Camden,  N.  J.  No  property  was 
owned  by  the  company  in  Philadelphia  except  the  docks 
where  the  boats  were  landed  and  where  they  remained  only 
long  enough  to  receive  and  discharge  passengers  and  freight. 

1  Wiggins  Ferry  Co.  v.  East  St.  Louis,  107  U.  S.  365,  affirming  the 
Supreme  Court  of  Illinois,  102  111.  514. 

2  This  case  was  referred  to  in  the  opinion  in  Covington  Bridge  Co. 
V.  Kentucljy,  supra.  In  United  States  Express  Co.  v.  Allen,  39  Fed. 
Rep.  714,  it  is  said  that  the  Supreme  Court  in  Leloup  v.  Mobile,  127 
U.  S.  640,  substantially  overrules  this  case,  as  well  as  that  of  Os- 
borne V.  Mobile,  16  Wall.  479,  and  that  the  language  of  the  court, 
though  directed  to  the  Osborne  case,  must  in  principle  apply  with 
equal  force  to  the  Wiggins  Ferry  case.  Wiggins  Ferry  Co.  v.  East 
St.  Louis  was  also  distinguished  by  the  United  States  Circuit 
Court  for  the  Southern  District  of  Illinois,  in  St.  Clair  County  v.  The 
Interstate  Car  Transfer  Co.,  109  Fed.  R.  741,  where  it  was  held 
that  the  county  of  St.  Clair,  wherein  the  city  of  East  St.  Louis  is 
situated,  could  not  exact  a  license  fee  for  the  operation  of  a  ferry 
transferring  railroad  cars  across  the  Mississippi  from  East  St.  Louis 
to  St.  Louis.  There  the  corporation  owning  and  operating  the  ferry 
was  a  Missouri  corporation  domiciled  in  St.  Louis,  and  the  boats 
had  their  situs  in  St.  Louis,  and  the  only  property  in  Illinois  con- 
sisted of  a  landing  place  and  facilities. 


§    196        TAXATION    OF    STEAMBOATS',    VESSELS,    ETC.  211 

The  Supreme  Court,  reversing  the  Supreme  Court  of 
Pennsj'lvania,!  decided  that  the  ferry  company  was  not 
taxable  in  Pennsylvania  upon  its  capital  stock.  Its  busi- 
ness was  interstate  commerce,  and,  whether  this  was  con- 
ducted by  individuals  or  corporations,  the  property  em- 
ployed in  it  could  be  taxed  only  where  it  had  its  taxable 
situs. 

After  reviewing  the  cases,  the  court  stated  at  page  217, 
that,  although  the  privilege  of  keeping  a  ferry,  with  the 
right  to  take  toll  for  passengers  and  freight,  is  a  franchise 
grantable  by  the  State,  still  the  fact  remains  that  such  a 
ferry  is  a  necessary  means  of  commercial  intereourse  be- 
tween the  States  bordering  on  their  dividing  waters,  and  it 
must  therefore  be  conducted  without  the  imposition  by  the 
States  of  taxes  or  other  burdens  upon  the  commerce  be- 
tween them.  Freedom  from  such  impositions  does  not  of 
course  imply  exemption  from  reasonable  charges  for  the 
carriage  of  persons,  in  the  way  of  tolls  or  fares,  or  from 
the  ordinary  taxation  to  which  other  property  is  subjected. 
Reasonable  charges  for  the  use  of  property,  either  on  water 
or  land,  are  not  an  interference  with  the  freedom  of  inter- 
state transportation. 

"How  conflicting  legislation  of  the  two  States  on  the 
subject  of  ferries  on  waters  dividing  them  is  to  be  met  and 
treated  is  not  a  question  before  us  for  consideration. 
Pennsylvania  has  never  attempted  to  exercise  its  power  of 
establishing  and  regulating  ferries  across  the  Delaware  river. 
Any  one,  so  far  as  her  laws  are  concerned,  is  free,  as  we  are 
informed,  to  establish  such  ferries  as  he  may  choose.  No 
license  fee  is  exacted  from  ferry-keepers.  She  merely 
exercises  the  right  to  designate  the  places  of  lauding,  as 
she  does  the  places  of  landing  for  all  vessels  engaged  in  * 
commerce.     The    question,  therefore,  respecting  the  tax  in 

1  Gloucester  Ferry  Co.  v.  Pennsylvania,  114  U.  S.  196 


212  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  §    197 

the  present  case  is  not  complicated  by  any  action  of  that 
State  concerning  ferries.  However  great  her  power,  no 
legislation  on  her  part  can  impose  a  tax  on  that  portion  of 
interstate  commerce  which  is  involved  in  the  transportation 
of  persons  and  freight,  whatever  be  the  instrumentality  by 
which  it  is  carried  on." 

§  197.  Taxation  of  interstate  bridges. 

Bridges  over  navigable  rivers  separating  two  States  have 
been  held  properly  taxable  by  each  State  for  that  part  of 
the  tangible  and  intangible  property  of  the  bridge  located 
therein. 1  The  court  said  that  the  company  was  chartered 
by  the  State  of  Kentucky  to  build  and  operate  a  bridge,  and 
that  State  could  properly  include  the  value  of  the  franchises 
it  had  granted  in  the  valuation  of  the  company's  property. 
The  Act  of  Congress  conferred  on  the  company  no  right  or 
franchise  to  erect  the  bridge  or  to  collect  tolls  for  its  use. 
It  merely  regulated  the  height  of  the  bridge  over  the  river 
and  the  width  of  its  spans,  in  order  that  it  might  not  inter- 
fere with  navigation. 

In  a  later  case  the  same  bridge  companj^  was  held  prop- 
erly taxable  by  the  city  of  Henderson  on  so  much  of  its 
property  as  was  permanently  between  low  water  mark  on 
the  Kentucky  shore  and  low  water  mark  on  the  Indiana 
shore  of  the  Ohio  Kiver,  it  being  settled  that  the  boundary 
of  Kentucky  extended  to  that  point,  and  that  the  power  of 
Kentucky  to  tax  the  bridge  was  not  affected  by  the  fact 
that  it  was  erected  by  the  authority  and  with  the  consent 
of   Congress . 

1  Henderson  Bridge  Co.  v.  Kentucky,  166  U.  S.  150,  Justices  White, 
Field,  Harlan  and  Brown  dissenting. 

2  Henderson  Bridge  Co.  v.  Henderson,  173  U.  S.  592.  See  infra,  Chap- 
ter VII,  "Taxation  of  Interstate  Carriers." 


§   198        TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.  213 

§  198.  Taxation  of  interstate  bridge  not  interference  with 
interstate  commerce. 

As  to  the  alleged  interference  with  interstate  commerce, 
the  court  said,  at  page  153 :  — 

"Clearly  the  tax  was  not  a  tax  on  the  interstate  business 
carried  on  over  or  by  means  of  the  bridge,  because  the 
bridge  company  did  not  transact  such  business.  That 
business  was  carried  on  by  the  persons  and  corporations 
which  paid  the  bridge  company  tolls  for  the  privilege  of 
using  the  bridge.  The  fact  that  the  tax  in  question  was 
to  some  extent  affected  by  the  amount  of  the  tolls  received, 
and  therefore  might  be  supposed  to  increase  the  rate  of 
tolls,  is  too  remote  and  incidental  to  make  it  a  tax  on  the 
business  transacted . " 

In  a  later  case,  involving  the  taxation  of  the  Keokuk  and 
Hamilton  Bridge,  the  boundary  line  which  divided  the 
bridge  was  declared  to  be  the  boundary  line  between  the  two 
States  of  Towa  and  Illinois,  and  this  was  the  middle  of  the 
main  navigable  channel  of  the  Mississippi  river.  The  de- 
termination therefore  of  the  line  which  divided  the  bridge 
between  the  two  States  was  a  question  of  fact,  and  it  was 
not  within  the  province  of  the  court  to  review  the  findino-s 
of  the  Supreme  Court  of  Illinois  as  to  the  part  assessed  in 
lUinois.i  It  was  claimed  in  this  case  that  no  part  of  the 
capital  stock  was  assessable,  because  the  tax  upon  it  was  a 
tax  upon  interstate  commerce  and  upon  a  franchise  conferred 
l)y  the  Federal  government,  but  this  position  was  adjudged 
untenable. 

The  increased  value  of  a  track  by  reason  of  a  bridge, 
when  the  bridge  is  part  of  a  line  of  railway,  in  another 
case  was  said  to  be  properly  taken  into  consideration  in 
the   assessment  of    the  value    of  the   track,  the  separate 

1  Keokuk  &  HamilDon  Bridge  Co.  v.  Illinois,  175  U.  S.  626. 


214  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.         §   199 

assessment  of  the  value   of  the  bridge  and  track  being  a 
difference  of  form  rather  than  of  substance.^ 


§  199.  Taxation  of  tonnage. 

The  prohibition  of  any  tax  upon  tonnage  was  obviously 
supplementary  to  the  grant  to  Congress  of  control  over 
interstate  and  foreign  commerce,  and  should  be  construed 
in  connection  therewith. 

What  is  a  tax  upon  tonnage  within  the  meaning  of  this 
prohibition  can  only  be  determined  by  the  judicial  process 
of  inclusion  and  exclusion.  A  duty  upon  tonnage  within  the 
meaning  of  the  Constitution  is  a  charge  upon  a  vessel  as 
an  instrument  of  commerce  according  to  its  tonnage,  for 
the  privilege  of  entering  or  leaving  a  port  or  navigating 
the  public  waters  of  the  country ;  and  the  prohibition  was 
designed  to  prevent  the  States  from  imposing  hindrances 
of  this  kind  on  trading  in  vessels.^  A  statute  of  Louis- 
iana, that  the  Master  and  Wardens  of  the  Port  should  be 
entitled  to  demand  and  receive  in  addition  to  other  fees 
the  sum  of  five  dollars,  whether  called  on  to  perform 
any  service  or  not,  for  every  vessel  arriving  in  port,  was 
declared  to  be  a  duty  on  tonnage.  The  court  said  at  page 
34:  — 

"  In  the  most  obvious  and  general  sense  it  is  true,  those 
words  describe  a  duty  proportioned  to  the  tonnage  of  the 
vessel;   a  certain    rate   on  each  ton.     But  it  seems  plain 


1  Pittsburgh,  etc.,  R.  Co.  u.  Board  of  Public  Works  of  West  Virginia, 
172  U.  S.  32;  see  also  Lumberville  Bridge  Co.  v.  State  Board  of  Asses- 
sors, 55  N.  J.  L.  529,  and  25  L.  R.  A.  134,  holding  that  a  tax  by  the  State 
of  New  Jersey  of  one-tenth  of  one  per  cent  upon  the  whole  of  the  cap- 
ital stock  of  a  bridge  company,  incorporated  for  building  a  bridge  be- 
tween New  Jersey  and  Pennsylvania  and  requiring  concurrent  legislation 
of  both  States,  was  valid. 

2  See  Huse  v.  Glover,  119  U.  S.  543. 


§   199        TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.  215 

that,  taken  in  this  restricted  sense,  the  constitutional  pro- 
vision would  not  fully  accomplish  its  intent.  *  *  *  j^ 
was  not  only  a  pro  rata  tax  which  was  prohibited,  but  any 
duty  on  the  ship,  whether  a  fixed  sum  upon  its  whole  ton- 
nage, or  a  sura  to  be  ascertained  by  comparing  the  amount 
of  tonnage  with  the  rate  of  duty."  * 

In  the  State  Tonnage  Tax  Cases  from  Alabama,^  a  tax 
levied  by  Alabama  on  aU  steamboats,  vessels  and  other 
craft  plying  in  the  navigable  waters  of  the  State,  at  the 
rate  of  one  dollar  per  ton  of  the  registered  tonnage,  was 
held  to  be  a  tax  upon  tonnage,  and  the  language  of  the  act 
showed  clearly  that  it  was  intended  to  be  a  tax  on  the 
boats  as  instruments  of  commerce  and  not  as  j^roperty  in 
the  State.  The  court  said  that  it  was  immaterial  whether 
the  ships  or  vessels  taxed  belonged  to  citizens  of  that  State 
or  to  citizens  of  other  States,  as  the  prohibition  was  gen- 
eral, withdrawing  altogether  from  the  State  the  power  to 
lay  any  duties  on  tonnage,  under  any  circumstances,  with- 
out the  consent  of  Congress. 

An  ordinance  of  the  city  of  New  Orleans  levying  duties 
at  the  rate  of  ten  cents  per  ton  on  all  steamboats  mooring 
or  landing  at  the  port,  if  in  port  not  exceeding  five  days, 
and  of  five  dollars  per  day  after  the  five  days,  though  the 
port  of  New  Orleans  includes  some  twenty-two  miles  on 
which  wharves  had  been  built  for  only  about  two  miles, 
was  a  tax  upon  tonnage  in  violation  of  the  Constitution.^ 
The  court  said  that  it  could  not  be  supported  as  a  com- 
pensation for  the  use  of  the  city's  wharves  and  was  really 
a  tax  for  the  privilege  of  arriving  and  departing  from  the 
port.  A  fee  of  one  and  one-half  cents  per  ton,  required 
by  the  New  York  statute  to  be  paid  by  all  ships  or  vessels 

1  Steamship  Co.  v.  Portwardens,  G  Wall.  31 

'  12  Wallace  204. 

3  Cannon  v.  New  Orleans,  20  Wallace  577. 


216  TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.         §  200 

entering  the  ports  of  New  York  and  loading  or  unloading  - 
therein,  was  held  to  be  a  tax  upon  tonnage.^ 

So  also  was  an  act  of  Texas  invalid,  which  required  every 
vessel  arriving  at  quarantine  stations  in  the  State  to  pay  five 
dollars  for  the  first  one  hundred  tons  and  one  and  one-half 
cents  for  each  additional  ton.  As  this  was  for  defraying  the 
expenses  of  the  quarantine  regulations,  it  was  claimed  to  be 
justified  by  the  decision  in  Gibbons  v.  Ogden,  where  the 
court  speaks  of  quarantine  and  inspection  laws  as  being  within 
the  jurisdiction  justly  exercised  by  the  States  themselves  in 
the  regulation  of  conimerce.  The  Supreme  Court  said^ 
that,  while  the  power  to  establish  quarantine  laws  rests 
with  the  States,  it  cannot  be  exercised  in  violation  of  the 
restnctions  imposed  by  the  Federal  Constitution  upon 
their  taxing  power,  and  the  tax  was  adjudged  invalid  as  be- 
ing upon  tonnage.  An  example  of  a  valid  quarantine  reg- 
ulation, involving  the  payment  of  a  fee  graduated  accord- 
ing to  tonnage,  may  be  found  in  Morgan's  Steamship  Co. 
V.  Board  of  Health.^ 

§  200.  Property  taxation  and  compensation  for  services 

distinguislied  from  tonnage. 

• 

A  property  tax  lawfully  levied  upon  the  vessel  as  prop- 
erty, where  it  has  a  taxable  situs,  is  not  a  duty  upon 
tonnage.  Thus  in  Transportation  Co.  v.  Wheeling,*  the 
boats  used  in  navigating  the  Ohio  river  between  Wheeling 
and  Parkersburg,  and,  when  not  in  use,  laid  up  at  Wheel- 
ing, owned  by  a  West  Virginia  company,  whose  principal 
oflace  was  at  Wheeling  and  whose  stock  belonged  principally 
to  citizens  of  West  Virginia  and  Ohio,  were  held  properly 
taxable  at  Wheeling.     A  tax  so  levied  moreover  was  not  a 

1  Inman  Steamship  Co.  v.  Tinker,  94  U.  S.  238. 

2  Peete  v.  Morgan,  19  Wallace  581. 

3  118  U.S.  455. 

4  99  U.  S.  273, 


§   201        TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  217 

tax  upon  tonnage.  The  court  said  that  taxes  levied  by  the 
State  upon  vessels  owned  by  its  citizens  as  property,  based 
on  the  vakie  of  the  same  as  property,  are  not  within  the 
prohibition  of  the  Constitution,  and  that  assessments  of  this 
kind,  when  levied  for  municipal  purposes,  must  be  made 
against  the  owner  of  the  property  and  can  only  be  made  in 
the  municipality  where  the  owner  resides. 

On  the  other  hand  it  is  not  a  duty  upon  tonnage  where 
the  charge  imposed  is  only  a  reasonable  charge  for  services 
rendered,  as  for  the  use  of  an  improved  wharf  in  a  munici- 
pality, even  if  the  charge  is  proportioned  to  the  tonnage  of 
the  vessel.  Such  charges  have  been  sustained  in  a  number 
of  cases. ^ 

Thus,  in  the  case  of  Transportation  Company  v.  Parkers- 
burg,  the  exaction  of  the  fee  was  sustained,  although  plaintiff 
claimed  that  the  rates  charged  were  exorbitant  and  were 
merely  a  pretext  for  a  duty  on  tonnage.  But  the  court  re- 
fused to  inquire  into  the  secret  purpose  of  the  city.  Upon 
the  distinction  between  a  duty  on  tonnage  and  wharfao-e 
charges  it  said :  — 

§  201.  Supreme  Court  on   tonnage    duties  and   wharfage 
charges. 

*'When  the  Constitution  declares  that  'No  State  shall, 
without  the  consent  of  Congress,  lay  any  duty  of  tonnage  ;  ' 
and  when  Congress,  in  sect.  4220  of  the  Revised  Statutes, 
declares  that  '  no  vessel  belonging  to  any  citizen  of  the 
United  States,  trading  from  one  port  within  the  United 
States  to  another  port  within  the  United  States,  or  em- 
ploj^ed  in  the  bank,  whale  or  other  fisheries,  shall  be 
subject  to  tonnage  tax  or  duty,  if  such  vessel  be  licensed, 

1  Packet  Co.  v.  Keokuk,  95  U.  S.  80;  Packet  Co.  v.  St.  Louis,  100  U.  S. 
423;  Vicksburgi;.  Tobin,  lOOU.  S.  430;  Packet  Co.  v.  Catlettsburg,  105 
U.  S.  559;  Transportatioa  Co.  v.  Parkersburg,  107  U.  S.  691. 


218  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  §    202 

registered,  or  enrolled,'  they  mean  by  the  phrases,  '  duty 
of  tonnage,'  and  'tonnage  tax  or  duty,'  a  charge,  tax,  or 
duty  on  a  vessel  for  the  privilege  of  entering  a  port ;  and 
although  usually  levied  according  to  tonnage,  and  so  acquir- 
ing its  name,  it  is  not  confined  to  that  method  of  rating 
the  charge.  It  has  nothing  to  do  with  wharfage,  which  is 
a  charge  against  a  vessel  for  using  or  lying  at  a  wharf  or 
landing.  The  one  is  imposed  by  the  government,  the  other 
by  the  owner  of  the  wharf  or  landing.  The  one  is  a 
commercial  regulation,  dictated  by  the  general  policy  of 
the  country  upon  considerations  having  reference  to  its 
commerce,  or  revenue;  the  other  is  a  rent  charged  by  the 
owner  of  the  property  for  its  temporary  use.  It  is  obvious 
that  the  mode  of  rating  the  charge  in  either  case,  whether 
according  to  the  size  or  capacity  of  the  vessel,  or  other- 
wise, has  nothing  to  do  with  its  essential  nature.  It  is 
also  obvious  that  since  a  wharf  is  property,  and  wharfage 
is  a  charge  or  rent  for  its  temporary  use,  the  question 
whether  the  owner  derives  more  or  less  revenue  from  it,  or 
whether  more  or  less  than  the  cost  of  building  and  main- 
taining it,  or  what  disposition  he  makes  of  such  revenue, 
can  in  no  way  concern  those  who  make  use  of  the  wharf 
and  are  required  to  pay  the  regular  charges  therefor ;  pro- 
vided, always,  that  the  charges  are  reasonable  and  not  ex- 
orbitant. "^ 

§  202.  Wharfage  charges  may  be  graduated  by  tonnage. 

Charges  for  wharfage  may  be  graduated  by  the  tonnage 
of  vessels  using  the  wharves,  and  this  is  not  a  duty  on  ton- 

1  The  opinion  contains  an  exhaustive  review  of  the  cases,  but  holds 
that  the  reasonableness  of  the  charge  for  wharfage  must  be  determined 
by  the  laws  of  the  State  within  whose  jurisdiction  the  wharf  is  situ- 
ated. Justice  Harlan  dissented,  holding  that  the  courts  of  the  Union 
are  empowered  to  protect  the  rights  of  free  commerce  against  unrea- 
sonable exactions. 


§   203        TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.  219 

nage.  An  ordinance  of  New  Orleans  therefore  fixing  the 
rates  at  so  much  per  ton  for  using  the  new  wharf,  the 
proceeds  being  used  to  repair  that  wharf  and  construct 
new  ones,  was  valid. ^  The  tolls  levied  by  the  State  of 
Illinois  upon  the  passfige  of  vessels  through  the  locks  of 
the  Illinois  river,  as  compensation  for  the  onthiy  of  the 
State  in  improving  the  navigation  of  the  river,  were  held 
to  be  valid  on  the  same  principle,  as  the  State  was  allowed 
to  charge  compensation  for  the  use  of  M'harves  and  docks, 
and  there  was  nothing  in  the  objection  that  the  rates  of 
toll  were  according  to  tonnage  and  the  amount  of  freight. ^ 

§  203.  But  wharfage  and.  similar  charges  must  he  without 
discrimination.   . 

But  the  right  of  the  State,  or  municipality  acting  under 
State  authority,  to  make  reasonable  charges  for  the  use  of 
improved  wharves  and  similar  privileges  is  subject  to  the 
qualitication  incident  to  the  exercise  of  its  taxing  authority 
by  a  State  in  any  case,  that  it  must  be  without  discrimina- 
tion against  the  citizens  and  products  of  other  States. 
This  was  forcibly  illustrated  in  the  case  of  Guy  v.  Balti- 
more,^ where  a  city  wharfage  charge  had  been  in  force 
some  fifty  years  and  was  declared  invalid  as  interfering 
with  commerce,  on  the  ground  that  it  was  exacted  only 
from  vessels  transporting  goods  or  articles  other  than  the 
products  of  the  State.  It  was  argued  that  the  city,  as  the 
owner  of  the  wharves,  had  the  right  to  permit  their  free 
use  by  vessels  loaded  with  the  products  of  Maryland,  and 
that  others  could  not  complain  so  long  as  they  were  not 
required  to  pay  more  than  a  reasonable  compensation.     The 


1  Ouachita  Packet  Co.  v.  Aiken,  121  U.  S.  444. 

2  Huse  V.  Glover,  119  U.  S.  543;  see  also  Escanaba  Co.  v.  Chicago,  107 
U.  S.  678;  Sands  ??.  Manistee  Improvement  Co.,  123  U.  S.  288. 

3  100  U.  S.  434. 


220  TAXATION    OF    STEAMBOATS,    VESSELS,    ETC.         §   204 

court  said  that  the  vice  "was  in  the  discrimination,  and 
that  the  city  could  no  more  discriminate  in  the  use  of  the 
wharves  than  it  could  in  the  use  of  the  public  streets  or 
other  highways.  If  it  permitted  citizens  of  that  State  to 
use  them  without  charge,  it  must  give  the  same  privilege 
to  citizens  and  vessels  of  other  States,  and  the  State  could, 
by  neither  direct  nor  indirect  means,  build  up  its  domestic 
commerce  through  the  imposition  of  unequal  and  oppres- 
sive burdens  upon  the  business  and  industries  of  other 
States.  The  opinion  continues  at  page  443  :  — 

"Such  exactions,  in  the  name  of  wharfage,  must  be  re- 
garded as  taxation  upon  interstate  commerce.  Municipal 
corporations,  owning  wharves  upon  the  public  navigable 
waters  of  the  United  States,  and  quasi  public  corporations 
transporting  the  products  of  the  countr}^  cannot  be  per- 
mitted by  discriminations  of  that  character  to  impede  com- 
mercial intercourse  and  traffic  among  the  several  States  and 
with  foreia;n  nations." 

§  204.  Quarantine  and  pilotage  charges. 

Inspection  laws  of  the  State  are  expressly  authorized  by 
the  Constitution,  see  supra,  §  129,  and  quarantine  laws 
belono-  to  that  class  of  State  leo;islation  which  is  valid  until 
forbidden  by  Congress,  unless  it  covers  the  same  ground 
that  is  covered  by  the  legislation  of  Congress.^  In  the 
absence  of  such  Federal  legislation.  Congress  is  deemed 
to  have,  in  effect,  adopted  the  State  laws  and  forbidden 
interference  with  their  enforcement.  The  fees  collected 
under  the  quarantine  laws  of  Louisiana  were  therefore 
valid ;  they  were  not  tonnage  taxes  within  the  meaning  of 
the  word  as  used  in  the  Constitution,  but  compensation  for 
services  rendered.  The  court  said,  at  page  463,  that  the 
fee  complained  of,  $30  a  vessel,  was  not  a  tax  within  the 

^  Morgan's  Steamship  Co.  v.  Louisiana,  118  U.  S.  465. 


§  204        TAXATION   OF   STEAMBOATS,    VESSELS,    ETC.  221 

meaning  of  that  word  as  used  in  the  Constitution,  nor  did 
the  exaction  of  the  fee  amount  to  a  regulation  of  com- 
merce under  the  Constitution. ^  The  enforcement  of  these 
quarantine  regulations  and  the  collection  of  these  charges 
did  not  give  the  ports  of  any  other  State  a  preference  over 
those  of  Louisiana. 

State  pilotage  laws  and  the  fees  connected  therewith  for 
pilotage  services  were  held  by  the  Supreme  Court  in  the 
leading  case 2  to  be  regulations  of  commerce  of  the  class 
which  do  not  require  a  uniform  rule  and  which  can  prop- 
erly be  governed  by  rules  varjdng  with  the  locality,  subject 
however  to  the  paramount  control  of  Congress  whenever 
Congress  deems  proper  to  exercise  its  power. ^  The  court 
in  this  case  sustained  the  act  of  Pennsvlvania,  accord! na:  to 
which  a  vessel  refusing  to  take  a  pilot  forfeited  to  the 
Master  Warden  of  the  Pilots  for  tlie  use  of  a  society  for 
the  relief  of  pilots  one-half  of  the  amount  of  pilotage. 
Such  a  law  did  not  give  a  preference  to  the  ports  of  one 
State  over  those  of  another,  nor  was  it  a  violation  of 
the  Constitution  providing  that  the  vessels  to  or  from  one 
State  shall  not  be  obliged  to  enter,  clear  or  pay  duties  in 
another.  The  pilotage  fees  were  not  duties  within  the 
meaninoj  of  the  Constitution.  This  rulins^  has  been  con- 
sistently  adhered  to.* 

1  Justice  Bradley  dissented. 

2  Cooley  V.  Port  Wardens,  12  Howard  299. 

8  Sinnott  v.  Com.  of  Mobile,  22  How.  227;  Foster  v.  Com.  of  Pilotage, 
22  How.  245. 

4  Ex  parte  McNeil,  13  Wall.  236.  See  also  Covington  Bridge  Co.  v. 
Kentucky,  154  U.  S.  204,  211;  Huus  v.  Porto  Rico  Steamship  Co.,  182 
U.S.  392,  holding  that  a  vessel  engaged  in  trade  between  Porto  Rican 
ports  and  the  ports  of  the  United  States  was  not  subject  to  the  New 
York  pilotage  laws,  because  it  was  engaged  in  the  coastwise  commerce 
of  the  country  within  the  meaning  of  the  Act  of  Congress,  subjecting 
such  vessels  to  the  navigation  laws  of  the  United  States.  This  coast- 
ing trade  was  intended  to  include  the  domestic  trade  of  the  United 
States  by  other  than  interior  waters. 


CHAPTER     Til. 

TAXATION  OF  INTERSTATE  COMMERCE. 

§  90S.  Difficolty  of  deflniag  line  between  Federal  and  SUte  power. 
S06.  Liceiise  taxaticNB. 

207.  Osborne  r.  Mobfe. 

806.  Osborne  r.  Mobile  overruled. 

209.  License  tax  on  asents  of  interstate  railroads  held  invalid. 

210.  Immaterial  tbat  license  interfering  with  commerce  purports  to  be 

for  regulation  and  not  for  re  venae. 
SIX.  License  for  privilege  of  transacting  local  business  is  valid. 

213.  Decision  of  State  court  that  license  only  applies  to  local  business 

conclusive. 
SIS.  It  mast  clearlv  appear  that  intra-state  business  alone  is  taxed. 

214.  License  must  not  be  condition  for  transacting  interstate  business. 

215.  License  or  privilege  tax  cot  exceeding  tax  on  property  valid. 

216.  Tax  on  interstate  telegraph  messages  invalid. 

217.  Privilese  tax  on  sleeping  cars. 

218.  Compensation  exacted  by  city  for  use  of  poles  in  streets  not  reg- 

ulation of  commerce. 

219.  Payment  reserved  as  bonus  in  railroad  charter  not  regulation  of 

commerce. 
S20.  Taxation  of  rolling  stock. 
221.  Bale  of  average  of  habituil  use  adopted. 

223.  Supreme  Court  on  taxable  situs  of  railroad  cars. 
233.  Taxation  of  refrigerator  cars. 

224.  Mileage  appor.ionment  in  taxation  of  rolling  stock. 

225.  State  tax  on  freight  invalid. 

236.  State  tax  on  railway  gross  receipts. 

237.  Mileage  apportionment  in  interstate  rail?ray  taxation. 

238.  Taxation  of  net  earnings  sustained. 

239.  Tax  on  gross  earnings  held  invalid. 

230.  Tax  on  gross  receipts  held  invalid  in  State  couits. 

231.  Maine  r.  Grand  Truni  R.  R.  Co. 

232.  Tax  on  gross  earnings  apportioned  by  mUe^e  valid  as  excise  tax. 

233.  Principle  reaj5rmed. 

234-  Immaterial  whether  corporation  is  domestic  or  foreign. 

235.  Tax  not  upon  receipts  as  such  but  excise  tax  apportioned  to 

receipts. 

236.  State  tax  on  net  receipts. 

237.  Valuation  of  property  by  capitalization  of  receipts. 
(222) 


§  206  TAXATION   OF   JSTZEsTATE    CAUHJEJiK.  HZ 

f  205.  IMfficnlty  of  defining  line    1>etireen   Federal   aad. 
%XjaXft  power. 

The  mo«t  important  and  difficak  qaes^kms,  in  defiiiin«r 
the  line  betvreen  the  Federal  reguliition  of  coiimi»ee  and 
the  t-axTng  pKjwer  of  the  State,  have  arisen  in  eooneetMii 
with  taxation  npon  the  great  railroad,  teit^rafik  and  ex- 
{M-ess  evstems,  which  penetrate  the  difTerent  States  asd 
tnmsact  both  loc^  and  interstate  buaness.  Everr  form  of 
taxation  n{x>n  these  great  properties  which  has  bee^i  at- 
tempted has  been  contested  in  its  applicatka,  cm  aeeooBi; 
of  alleged  interference  w"-  -tate  cjonuneree.     The  de- 

cisions of  the  Supreme  C  __    n  the  qoestkms  pv^ented 

in  this  class  of  cases  have  not  been  unif onn,  and  the  £fi- 
cuItT  of  defining  the  line  where  the  State  and  TeAsral 
power?  meet  is  ilhistrated  br  the  frequent  di^enls  m.  the 
court  and  the  overruling  of  deei^ms  by  "fie  same  jndses 
who  pronocmced  them.  Thus  the  ocmrt  said  in  a  reoait 
case:*  — 

*•  Owing  to  the  paramount  neeessitr  of  mazntaiBing  nn- 
trammeled  freedom  of  comm^^oal  intercoorsc  b^rweai  tJie 
citizens  of  the  different  States  and  to  the  far^  that  so 
frei^uentlv  transportation  and  telegrapk  eoB^mues  traasa^ 
both  iocaJ  and  interstate  business,  it  has  be^  foond  £fi- 
cok  to  clearlv  define  the  line  where  the  State  ai^  Hae  Fed- 
eral powers  meet.  That  difficnltr  has  beoi  didly  fdt  br 
this  conrt  in  dealing  with  questions  of  taxaticn  -^  is 
shown  bv  the  nc-t  inrrequent  dissents  by  meanbers  c  r  _jn: 

when  the  eSort  has  been  made  to  fommlate  a  ««^feenl 
_rnr  of  the  law  az^dieaUb  to  SDehqiie&tk»s."         * 

I  i >r.  License  taxation. 

The  exaction  of  license  fees  for  the  porpose  of  reveBDe 
is  a  eofflmon  m^iiod  of  taxaticHL.  e^eeialhr  in  the  Sc^ztJban 


224        TAXATION  OF  INTERSTATE  CARRIERS.      §  207 

States.  Thus  there  are  business,  occupation  and  privilege 
taxes,  which  are  levied  both  by  the  State  directly  and  by 
the  municipalities  under  State  authority,  and  all  of  which 
are  in  some  States  called  by  the  generic  name  of  "  priv- 
ilege "  taxes.  As  heretofore  shown,  such  taxation  as  to 
all  persons  and  occupations  within  the  jurisdiction  of  the 
State  is  a  legitimate  method  of  State  taxation  limited  only 
by  its  own  discretion  and  the  restrictions  of  its  own  consti- 
tution.^  In  some  States  taxes  are  laid  in  this  form  of 
license  or  privilege  taxation,  which  in  others  are  levied 
usually  as  ad  valorem  taxes  upon  property,  and  this  applies 
to  corporations,  especially  that  class  known  as  public  utility 
or  quasi  public  corporations,  including  common  carriers. 
The  amount  of  the  license  fee  is  sometimes  graduated  ac- 
cording to  amount  of  earnings,  or  character  of  business, 
or  according  to  capital  invested,  and  in  the  latter  case  it 
does  not  differ  materially,  except  in  name,  from  ad  valorem 
or  property  taxation.  It  was  natural  then  that  the  forms 
of  taxation  which  were  customary  in  the  States  should  be 
applied  by  them  in  the  local  taxation  of  the  property  and 
business  of  the  interstate  railroad,  telegraph  and  express 
companies.  As  the  sj^stem  of  taxing  the  State's  interest 
in  the  aggregate  property  of  such  corporations  was  not 
then  developed,  the  privilege  or  occupation  tax  seemed  the 
only  practical  method,  where  the  business  transacted  might 
be  very  large  and  the  property  located  in  the  State  of 
trifling  value. 

§  207.  Osborne  v.  Mobile. 

It  is  an  interesting  illustration  of  the  tremendous  devel- 
opment of  the  transportation  and  commercial  interests  of 
the  country  in  recent  years,  that  the  decisions  of  the 
Supreme  Court  relating  to  the  right  of  the  State  to  tax 

1  See  supra,  Chapter  IV. 


§  207      TAXATION  OF  INTERSTATE  CARRIERS.        225 

the  agencies  of  interstate  commerce,  which  have  been  so 
numerous  during  the  past  twenty-five  years,  really  began 
after  the  close  of  the  Civil  "War  period.  The  first  case  in 
the  Supreme  Court  on  license  taxation  of  an  interstate 
carrier,  that  is,  on  the  privilege  of  maintaining  an  office 
and  doing  business  in  the  State,  was  that  of  Osborne  v. 
Mobile,  decided  in  1872.^  An  ordinance  of  the  cit3^  of 
^Mobile  required  everj^  express  or  railroad  company  doing 
business  in  that  city  to  pay  an  annual  license.  The  fee 
was  graded,  so  that  $500  was  charged  for  a  first-class 
license,  where  the  business  extended  beyond  the  limits  of 
the  State,  $100  for  a  second-class  license  for  business 
wholly  within  the  State,  and  $50  for  a  third-class  license 
for  business  wholly  within  the  city.  The  agent  of  an  in- 
terstate express  company  was  convicted  of  operating  his 
agency  without  paying  his  license  tax,  and  this  conviction 
was  sustained  in  the  State  Supreme  Court.  The  judgment 
was  affirmed  by  the  Supreme  Court,  Chief  Justice  Chase 
delivering  the  unanimous  opinion.  He  said  in  part,  at  page 
481:  "The  difficulty  of  drawing  the  line  between  consti- 
tutional and  unconstitutional  taxation  by  the  State  was 
acknowledged  and  has  always  been  acknowledged  by  this 
court ;  but  that  there  is  such  a  line  is  clear,  and  the  court 
can  best  discharge  its  duty  by  determining  in  each  case  on 
which  side  the  tax  complained  of  is.  It  is  as  important  to 
leave  the  rightful  powers  of  the  State  in  respect  to  taxa- 
tion unimpaired  as  to  maintain  the  powers  of  the  Federal 
government  in  their  integrity." 

The  court  said  that  there  was  no  discrimination  in  the 
tax,  between  the  express  company  and  the  corporations  and 
citizens  of  Alabama,  because  the  license  was  the  same  for 
whomsoever  the  business  was  transacted;  and  that,  as 
Congress   had  never  undertaken  to  exercise  its  power  to 

1  16  Wallace,  479. 

15 


226  TAXATION    OF    INTERSTATE    CARRIERS.  §    208 

regulate  commerce  in  any  manner  inconsistent  with  this 
municipal  ordinance,  the  right  of  State  taxation  was  not 
taken  away.     The  court  concluded  at  page  482  :  — 

"  The  license  tax  in  the  present  case  was  upon  a  busi- 
ness carried  on  within  the  city  of  Mobile.  The  business 
licensed  included  transportation  beyond  the  limits  of  the 
State,  or  rather  the  making  of  contracts,  within  the  State, 
for  such  transportation  beyond  it.  It  was  with  reference 
to  this  feature  of  the  business  that  the  tax  was,  in  part,  im- 
posed ;  but  it  was  no  more  a  tax  upon  interstate  commerce 
than  a  general  tax  on  drayage  would  be  because  the  licensed 
drayman  might  sometimes  be  employed  in  hauling  goods  to 
vessels  to  be  transported  bej^ond  the  limits  of  the  State. 

"We  think  it  would  be  going  too  far  so  to  narrow  the 
limits  of  State  taxation." 

§  208.  Osborne  v.  Mobile  overruled. 

The  decision  in  Osborne  v.  Mobile  was  followed  by  the 
State  courts,  which  accordingly  sustained  license  taxation, 
both  by  the  States  and  municipalities,  upon  common  car- 
riers, for  the  privilege  of  conducting  their  business  and 
maintaining  offices  within  the  State  or  city.  They  held 
that  there  was  no  interference  with  interstate  commerce 
where  the  license  was  without  discrimination  as  between 
citizens  of  the  State  and  non-residents.^ 

About  fifteen  years  later  the  question  came  again  before 
the  Supreme  Court  in  reference  to  a  license  tax  levied"  by 
the  same  city  upon  telegraph  companies.     The  agent  of  the 

1  Thus,  in  Virginia,  W.  U.  Tel  Co.  v.  Richmond,  26  Grattan  1;  Ten- 
nessee, Lightburn  v.  Taxing  District  of  Shelby  County,  4  Lea  219, 
sustaining  a  privilege  tax  on  a  steamboat  engaged  in  interstate  com- 
merce; Memphis  &  L.  R,  Co.  v.  Dolan,  14  Fed.  Rep.  532,  where  the  U.  S. 
Circuit  Court  in  Tennessee  sustained  a  privilege  tax  on  an  express  com- 
pany engaged  in  interstate  commerce;  and  in  Texas,  W.U.Tel.  Co.  v. 
State,  55  Tex.  314.    All  of  these  cases  followed  Osborne  v.  Mobile. 


§    208  TAXi^TION    OF    INTERSTATE    CARRIERS.  227 

Western  Union  Telegraph  Company  was  fined  for  failing 
to  pay  an  annual  license  tax  of  $225,  and  the  conviction 
was  sustained  in  the  State  court,  which  overruled  the  de- 
fense that  the  license  was  an  interference   with   interstate 


commerce. 


But  the  Supreme  Court,  in  an  exhaustive  opinion  by 
Justice  Bradley,  without  dissent,^  held  that  the  ordinance 
was  void,  as  the  tax  affected  the  whole  of  the  company's 
business,  interstate  as  well  as  local,  and  that  the  business 
of  telegraphing  is  commerce  between  the  States.  The 
telegraph  company  was  moreover  invested  with  the  powers 
and  privileges  conferred  by  the  Act  of  Congress  of  July  24, 
1866,  which  declared  that  the  erection  of  telegraph  lines 
should,  as  against  State  interference,  be  free  to  all  who 
accepted  the  terms  of  the  act,  and  that  a  telegraph 
company  of  one  State  should  not,  after  accepting  such, 
terms,  be  excluded  by  another  from  prosecuting  its  business 
within  her  jurisdiction.^  The  decision  of  the  court  how- 
ever  was  not  based   upon  this  Act  of  Congress,  but  upon 

1  The  state  court  in  its  opinion,  as  quoted  at  page  644  in  the  opinion 
of  the  Supreme  Court,  said:  — 

"  We  will  not  gainsay  that  this  license  tax  was  imposed  as  a  revenue 
measure  —  as  a  means  of  taxing  the  business,  and  thus  compelling  it  to 
aid  in  supporting  the  city  government.  That  no  revenue  for  State  or 
municipal  purposes  can  be  derived  from  the  agencies  or  instrumentalities 
of  commerce,  no  one  will  contend.  The  question  generally  mooted  is, 
how  shall  this  end  be  attained?  In  the  light  of  the  many  adjudications 
on  the  subject,  the  ablest  jurists  will  admit  that  the  line  which  separates 
the  power  from  its  abuse  is  sometimes  very  difficult  to  trace.  No  possi- 
ble good  could  come  from  any  attempt  to  collate,  explain  and  harmonize 
them.  We  will  not  attempt  it.  We  confess  ourselves  unable  to  draw  a 
distinction  between  this  case  and  the  principle  involved  in  Osborne  w 
Mobile,  16  Wall.  479.  In  that  case  the  license  levy  was  upheld,  and  we 
think  it  should  be  in  this." 

2  Leloup  V.  Mobile,  127  U.  S.  640.  Three  of  the  Justices,  Bradley, 
Miller  and  Field,  had  concurred  in  Osborne  v.  Mobile. 

3  As  to  this  Act  of  Congress  see  Pensacola  Telegraph  Co.  v.  W.  U.  Tol. 
Co.,  96  U.  S.  1. 


228  TAXATION    OF    INTERSTATE    CARRIERS.  §  208 

the  broad  ground  that  the  State  could  not  tax  the  privilege 
of  transactino;  interstate  commerce.  It  was  said  that  as 
the  State  could  not  tax  interstate  commerce,  it  could  not 
tax  the  privilege  of  conducting  that  commerce. 

With  reference  to  the  case  of  Osborne  v.  Mobile,  upon 
which  the  State  court  had  relied,  the  court  said,  page  647, 
after  recitino;  the  terms  of  the  ordinance  sustained  in  that 
case:  "  This  was  in  December  term,  1872.  In  view  of  the 
course  of  decisions  which  have  been  made  since  that  time, 
it  is  very  certain  that  such  an  ordinance  would  now  be  re- 
garded as  repugnant  to  the  power  conferred  upon  Congress 
to  resrulate  commerce  among  the  several  States." 

And  added,  1.  c.  p.  648  :  — 

*'  A  great  number  and  variety  of  cases  involving  the 
commercial  power  of  Congress  have  been  brought  to  the 
attention  of  this  court  during  the  past  fifteen  years  which 
have  frequently  made  it  necessary  to  re-examine  the  whole 
subject  with  care ;  and  the  result  has  sometimes  been  that 
in  order  to  srive  full  and  fair  effect  to  the  different  clauses 
of  the  Constitution,  the  court  has  felt  constrained  to  refer 
to  the  fundamental  principles  stated  and  illustrated  with  so 
much  clearness  and  force  by  Chief  Justice  Marshall  and 
other  members  of  the  court  in  former  times,  and  to  modify 
in  some  degree  certain  dicta  and  decisions  which  have 
occasionally  been  made  in  the  intervening  period.  This 
is  always  done,  however,  with  great  caution,  and  an  anxious 
desire  to  place  the  final  conclusion  reached  upon  the  fairest 
and  most  just  construction  of  the  Constitution  in  all  its 
parts." 

The  conclusion  was  therefore,  1.  c.  page  648,  "  that  no 
State  has  the  right  to  lay  a  tax  on  interstate  commerce  in 
any  form,  whether  by  way  of  duties  laid  on  the  transport- 
ation of  the  subjects  of  that  commerce,  or  on  the  receipts 
derived  from  that  transportation,  or  on  the  occupation  or 
business  of  carrying  it  on,  and  the  reason  is   that  such 


§  209      TAXATION  OF  INTERSTATE  CARRIERS.         229 

taxation  is  a  burden  on  that  commerce  and  amounts  to  a 
regulation  of  it,  which  belongs  solely  to  Congress."  It 
was  also  said  that  this  exemption  of  interstate  and  foreio-n 

o 

commerce  from  State  regulation  does  not  prevent  the  State 
from  taxing  the  property  of  those  engaged  in  such  com- 
merce located  in  the  State,  as  it  taxes  the  property  of  other 
citizens. 

§  209.  License  tax  on  agrents  of  interstate  railroads  held 
invalid. 

The  same  principle  was  applied  to  license  taxes  imposed 
for  maintaining  offices  in  which  to  conduct  interstate  busi- 
ness. Thus  the  agent  of  the  New  York,  Lake  Erie  & 
Western  Railroad,  which  extends  from  Chicago  to  New 
York,  maintained  an  office  in  San  Francisco  for  the  pur- 
pose of  inducing  passengers  going  from  that  point  to  New 
York  to  take  the  hne  of  his  railroad  at  Chicago.  He  was 
on  that  account  convicted  of  doing  business  in  San  Fran- 
cisco, in  violation  of  the  ordinance  of  that  city  requirino- 
the  payment  of  $25  quarterly  for  a  license.  The  convic- 
tion was  sustained  by  the  California  court,  but  was  reversed 
by  the  Supreme  Court. ^  It  was  argued  that  the  solicitino- 
of  passengers  in  California  for  a  railroad  running  from 
Chicago  to  New  York,  if  connected  with  interstate  com- 
merce at  all,  was  so  remotely  connected  with  it  that  the 
license  tax  could  not  be  regarded  as  an  interference.  But 
the  court  said  that  this  distinction  was  immaterial,  for  the 
business  was  interstate  and  the  tax  involved  the  licensino- 
of  the  commerce  of  the  road  to  an  extent  commensurate 
with  the  amount  of  business  done  by  the  agent. 

This  ruling  was  followed  in  the  case  of  the  license  tax 
imposed  by  the  State  of  Pennsylvania  upon  the  Norfolk  & 

1  McCall  V.  California,  136  U.  S.  104,  Chief  Justice  Fuller  and  Justices 
Brewer  and  Gray  dissenting. 


230  TAXATION   OF   INTERSTATE    CARRIERS.  §   210 

Western  Eailroad  Company,^  which  maintained  an  office 
in  Phihidelphia  for  the  use  of  its  officers  and  employees, 
the  road  being  a  link  in  a  through  line  of  road  by  which 
passengers  and  freight  were  carried  into  the  State  and 
from  that  State  into  others.  The  tax  was  declared  invalid, 
as  the  office  was  maintained  to  meet  the  necessities  of 
the  company's  interstate  business,  and  the  tax  upon  it 
was  declared  to  be  upon  one  of  the  means  and  instru- 
mentalities of  interstate  commerce. 

§  210.  Immaterial  that  license  interfering  witli  commerce 
purports  to  be  for  regulation  and  not  for  rev- 
enue. 

The  State  cannot  interfere  with  interstate  commerce  by 
exacting  a  privilege  tax  for  conducting  that  commerce,  and 
it  is  immaterial  whether  such  license  is  required  as  a  means 
of  police  regulation  or  for  purpose  of  revenue.  Thus 
an  act  of  the  State  of  Kentucky  required  all  agents  of 
foreign  express  companies,  before  carrying  on  business 
within  its  jurisdiction,  to  procure  licenses,  and  prelimi- 
nary thereto  to  satisfy  the  State  Auditor  that  their 
companies  had  each  an  actual  capital  of  not  less  than  a 
certain  amount;  so  that  the  license  was  claimed  to  be 
one  for  regulation,  rather  than  for  revenue.  The 
Supreme  Court  held,^  reversing  the  Court  of  Appeals  of 
Kentucky,  that  the  distinction  between  a  license  for  regu- 
lation and  one  for  revenue  was  not  material,  and  that  the 
State  could  enforce  such  police  regulations  with  refer- 
ence to  the  local  business  of  the  company,  but  not  as 
to  its  interstate  business.  It  said  that  the  decisions  of 
the  court    clearly    established    that    neither   licenses   nor 

1  Norfolk  &  Westero  R.  Co.  v.  Pennsylvania,  136  U.  S.  114. 

2  Crutcher  v.  Kentucky,  141  U.  S.  47,  Chief  Justice  Fuller  and  Justice 
Gray  dissentiug.  See  Commonwealtli  v.  Smith,  92  Ky.  38,  following  the 
above  decision  and  holding  void  another  express  company  license. 


§  211  -    TAXATION  OF  INTERSTATE  CARRIERS.        231 

indirect  taxation  of  any  kind,  nor  any  system  of  State 
taxation,  can  be  imposed  upon  interstate  any  more  than 
upon  foreign  commerce,  and  that  all  acts  of  legislation 
producing  any  such  result  are  to  that  extent  unconstitu- 
tional and  void. 

§  211.  License  for    privilege    of   transactiug-  local  busi- 
ness is  valid. 

While  the  State  can  license  the  interstate  business  of 
common  carriers  neither  by  way  of  regulation  nor  by  way 
of  revenue,  it  can  license  both  for  regulation  and  revenue 
the  privilege  of  conducting  local  business,  that  is,  business 
within  the  State,  though  the  same  company  may  be  engaged 
at  the  same  office  in  transacting  business  beyond  the  State. 
Accordingly  a  Missouri  statute  imposing  a  tax  upon  express 
companies  in  proportion  to  the  gross  receipts,  but  only  on 
the  receipts  for  business  done  within  the  State,  as  distin- 
guished from  interstate  business,  was  held  valid. ^  This 
was  not  a  license  or  privilege  tax,  but  the  distinction  be- 
tween business  Avithin  the  State  and  business  beyond  the 
State  has  been  applied  in  cases  of  license  taxation. 

Thus  a  license  tax  was  imposed  by  the  city  of  Charleston 
on  all  persons  engaged  in  any  business,  trade  or  profession 
in  that  city.  The  tax  was  limited  by  the  ordinance  to 
business  done  exclusively  within  the  city  of  Charleston,  so 
that  it  did  not  include  that  to  or  from  any  points  without 
the  city,  nor  any  done  for  the  government  of  the  United 
States,  its  officers  or  agents.^  It  was  claimed  that  the 
Postal  Telegraph  &  Cable  Company  was  not  within  the 
terms  of  this  ordinance,- because  it  did  not  do  any  business 
exclusively  within  the  city  of  Charleston;  that  its  city- 
offices  were  merely  initial  points  for  sending  out  messages, 

1  Pacific  Express  Co.  v.  Seibert,  142  U.  S.  339. 

2  Postal  Telegraph  Cable  Co.  p.  Charleston,  153  U.  S.  692,  Justices 
Harlan,  Brown  and  Jackson  dissenting. 


232        TAXATION  OF  INTERSTATE  CARRIERS.       §  212 

and  that  if  license  exactions  were  allowed  to  and  made  by 
the  various  cities  in  the  State,  grea^  injury  and  wrong 
would  be  done  the  telegraph  company.  But  the  court  sus- 
tained the  license  tax,  and  said  that,  if  hardship  resulted, 
it  was  not  within  the  power  of  the  court  to  redress  it.  The 
privileges  conferred  upon  the  company  by  the  Act  of  Con- 
gress were  not  inconsistent  with  the  right  on  the  part  of  a 
State  in  which  the  business  was  done  and  the  property 
acquired  to  tax  the  same,  within  the  limitations  of  the  Con- 
stitution. The  court  distinguished  this  case  from  that  of 
Leloup  V.  Port  of  Mobile,  on  the  ground  that  the  tax  in  that 
case  affected  the  whole  business,  iiicluding  that  which  was 
interstate. 

§  212.  Decision  of  State  court  that  license  only  applies  to 
local  business  conclusive. 

The  principle  was  thus  established  that  the  State,  or 
municipality  acting  under  the  authority  of  the  State,  can 
tax  a  common  carrier,  that  is,  a  railroad,  telegraph  or  express 
company,  for  the  privilege  of  conducting  a  local  business, 
but  cannot  tax  an  interstate  business.  Not  only  is  the  license 
held  valid,  if  it  is  expressly  imposed  upon  the  privilege  of 
conducting  the  local  business  only,  but  the  decision  of  the 
State  court  that  the  license  is  to  be  construed  as  thus  lim- 
ited in  its  application,  is  conclusiv^e  upon  the  Supreme 
Court. ^  Thus  it  was  said  by  the  court  in  a  recent  case 
where  a  license  tax  was  imposed  by  the  State  of  Florida  upon 
express  companies,  page  654:  "  In  other  words  this  statute 
as  construed  by  the  Supreme  Court  of  Florida  does  not 
exempt  the  express  company  from  taxation  upon  its  busi- 
ness which  is  solely  within  the  State,  even  though  at  the 
same  time  the  same  company  may  do  a  business  which  is  in- 

1  Osborne  u.  Florida,  164  U.  S.  650. 


§   213  TAXATION    OF    INTERSTATE    CARRIERS.  233 

terstate  in  its  character,  and  as  to  the  latter  kind  of  business 
the  statute  does  not  apply  to  or  affect  it." 

While  this  distinction  is  clear  enough  in  theory,  it  is 
doubtful  whether,  but  for  the  qualifications  hereafter  stated, 
it  would  not  afford  an  easy  method  to  the  State  author- 
ities, if  so  disposed,  of  evading  the  prohibition  against  in- 
terference with  interstate  commerce.  Thus  a  license  tax  of 
say  $500  per  annum  for  conducting  a  railroad  or  telegraph 
or  express  office  is  invalid,  if  it  is  not,  by  its  express  terms 
or  by  the  construction  of  the  State  court,  limited  to  the 
privilege  of  conducting  a  local  business.  But  if  it  is  so 
limited,  it  will  be  valid.  The  common  carrier  cannot  con- 
fine himself  to  interstate  business.  He  must  carry  on  a 
local  business  as  well,  and  the  local  business  must  be  trans- 
acted with  the  same  offices  and  the  same  facilities  as  the 
interstate  business.^ 

§  213.  It  must  clearly   appear  that  intra-state  business 
alone  is  taxed. 

The  Circuit  Court  of  Appeals,  Fourth  Circuit,  has 
said  2  that,  in  the  imposition  of  such  a  tax,  the  inter- 
state business  must  be  distinguished  from  intra-state 
business  or  such  discrimination  must  be  made  possi- 
ble, so  that  it  may  clearly  appear  that  the  intra-state  busi- 
ness alone  is  taxed.     In  this  case  an  ordinance  of  the  city 

1  Thus  the  Supreme  Court  of  Nebraska,  following  Postal  Telegraph 
Cable  Co.  v.  Charleston,  held  valid  an  ordinance  imposing  an  occupation 
tax  upon  railroads  having  a  depot  within  the  city,  and  exempting  from 
the  levy  all  interstate  commerce  of  such  corporation.  City  of  York??. 
C.  B.  &  Q.  R.  Co.,  56  Neb.  572.  And  the  Supreme  Court  of  Alabama, 
City  of  Anniston  v.  Southern  Railway  Co.,  112  Ala.  557,  held  valid  an 
annual  license  tax  of  §100  for  each  main  line  of  railroad  to  and  from 
other  points  in  the  State  of  Alabama.  See  al.so  W.  U.  Tel.  Co.  v.  City 
of  Fremont,  43  Neb.  499,  and  26  L.  R.  A.  706;  Knoxville  &  Ohio  R.  Co. 
V.  Harris,  99  Tenn.  684. 

2  Webster  v.  Bell,  15  C.  C.  A.  360.  See  also  United  States  Exp. 
Co.  V.  Hemmingway,  39  Fed.  Rep.  GO. 


234  TAXATION    OF    INTERSTATE    CARRIERS.  §    214 

of  Alexandria,  Virginia,  exacted  a  license  from  every  ex- 
press company  having  an  office  in  the  city  and  receiving 
goods,  wares  and  merchandise  which  it  forwarded  to  points 
within  the  State  of  Virginia,  or  receiving  goods,  wares 
and  merchandise  within  the  State  of  Virginia  and  deliver- 
ing them  in  the  city  of  Alexandria.  The  court  said  that 
this  ordinance  made  no  discrimination  between  business 
done  without  and  that  done  within  the  State,  but  imposed 
a  tax  upon  the  company,  if  it  had  an  office  in  the  city  and 
if  some  of  its  business  was  between  points  in  the  State  of 
Virginia.  It  was  held  that  such  an  ordinance  was  not 
valid  under  the  rule  laid  down  in  Postal  Telegraph  Cable 
Company  v.  Charleston. 

A  license  tax  is  invalid,  even  if  on  its  face  it  purports  to 
charge  for  intra-state  express  business  only,  if  its  amount 
is  determined  by  the  length  of  the  company's  line  beyond 
the  State,  as  it  is  thus  in  effect  a  tax  on  interstate  busi- 
ness.^ Thus  also  a  license  tax  on  a  telegraph  company 
reciting  that  it  is  in  lieu  of  an  ad  valorem  tax  on  the  prop- 
erty of  the  companj''  located  in  the  State,  but  which  ex- 
ceeds the  amount  which  would  be  levied  thereon  under  the 
property  tax  law  and  makes  the  payment  of  either  tax  a 
condition  precedent  to  the  company's  right  to  do  business 
in  the  city,  is  a  State  regulation  of   interstate  commerce.^ 

§  214.  License   must   not  be    condition  for    transacting 
interstate  business. 

License  taxation  as  con^monly  understood  consists  in  the 
payment  of  a  tax  for  the  privilege  of  conducting  a  business, 
which  but  for  such  license  would  be  unlawful.  A  license, 
as  the  term  implies,  is  the  permission  of  the  State  to  carry 
on  the  business,    and   the  payment  of  the  charge  exacted 

1  Express  Company  v.  Allen,  39  Fed.  Rep.  712. 

2  Postal  Tel.  Cable  Co.  v.  Richmond  (Va.),  99  Va.  102. 


§  215      TAXATION  OF  INTERSTATE  CARRIERS.         235 

therefor  is  a  condition  precedent  to  the  issuance  of  the 
license.  The  State  however,  in  the  requirement  of  a  license 
for  the  privilege  of  conducting  an  infra-state  business  can- 
not make  the  pajmient  of  the  license  tax  a  condition  of 
carrying  on  the  interstate  business,  but  must  leave  the 
enforcement  of  this  tax  to  the  ordinary  means  devised  for 
the  collection  of  taxes. ^  This  principle  applies  to  any  form 
of  taxation  upon  the  property  employed  in  interstate  com- 
merce. Thus  it  was  held  in  the  case  of  the  Western  Union 
Telegraph  Company  v.  Massachusetts  that  though  the  tax 
imposed  was  valid,  the  State  could  not  enforce  it  by  the 
issuance  of  an  injunction  restraining  the  corporation  from 
prosecuting  its  business  in  the  State  until  the  taxes  were 
paid.^ 

§  215.  License  or  privilege  tax  not  exceeding  tax  on  prop- 
erty valid. 

Another  important  qualification  of  the  State's  power  of 
license  taxation  of  interstate  carriers  is  that  the  tax  when 
imposed  must  not  exceed  the  sum  which  might  be  levied 
directly  upon  their  property  according  to  the  general  prop- 
erty taxation  in  that  State.  A  license  or  privilege  tax  which 
is  graduated  according  to  the  amount  and  value  of  the  prop- 
erty within  the  State  is  in  substance  and  effect  therefore  a 
property  tax.  Thus,  in  a  case  from  Mississippi,  a  tax  thus 
imposed  was  declared  ^  to  be  substantially  a  tax  on  property 
merely,  not  on  the  privilege  of  doing  an  interstate  business. 
The  substance  and  not  the  shadow  determines  whether 
the  power  has  been  validly  exercised.  The  court  said,  page 
G95:  — 

"It  is  settled  that  where  byway  of  duties  laid   on   the 
transportation  of  the  subjects  of  interstate  commerce,  or  on 

1  See  Postal  Telegraph  Cable  Co.  v.  Adams,  155  U.  S.  688. 

2  Western  Union  Tel.  Co.  v.  Massachusetts,  125  U.  S.  530. 

3  Postal  Tel.  Cable  Co.  v.  Adams,  155  U.  S.  688. 


236  TAXATION    OF    INTERSTATE    CARRIERS.  §    215 

the  receipts  derived  therefrom,  or  on  the  occupation  or  bus- 
iness of  carrying  it  on,  a  tax  is  levied  hy  a  State  on  inter- 
state commerce,  such  taxation  amounts  to  a  regulation  of 
such  commerce  and  cannot  be  sustained.  But  propert}^  in  a 
State  belonging  to  a  corporation,  whether  foreign  or  domes- 
tic, engaged  in  foreign  or  interstate  qommerce,  may  be  taxed, 
or  a  tax  ma}^  be  imposed  on  the  corporation  on  account  of 
its  property  within  the  State,  and  may  take  the  form  of  a 
tax  for  the  privilege  of  exercising  its  franchises  within  the 
State,  if  the  ascertainment  of  the  amount  is  made  depend- 
ent in  fact  on  the  value  of  its  property  situated  within  the 
State  (the  exaction,  therefore,  not  being  susceptible  of  ex- 
ceeding the  sum  which  might  be  levied  directly  thereon), 
and  if  paj^ment  be  not  made  a  condition  precedent  to  the 
right  to  carry  on  the  business,  but  its  enforcement  left  to  the 
ordinary  means  devised  for  the  collection  of  taxes.  The 
corporation  is  thus  made  to  bear  its  proper  proportion  of 
the  burdens  of  the  government  under  whose  protection  it 
conducts  its  operations,  while  interstate  commerce  is  not  in 
itself  subject  to  restraint  or  impediment."  ^ 

While  the  court  said  that  a  tax  thus  imposed  was  not 
open  to  objection,  it  went  further  and  stated  that  the 
license  would  be  invalid,  if  it  exacted  more  than  the 
amount  of  the  tax  levied  according  to  the  ordinary  prop- 
erty taxation.  It  said,  at  page  696:  "  Doubtless  no  State 
could  add  to  the  taxation  of  property  according  to  the 
rule  of  ordinary  property  taxation,  the  burden  of  a  license 
or  other  tax  on  the  privilege  of  using,  constructing  or 
operating  an  instrumentality    of  interstate  or  international 

1  Justices  Brewer  and  Harlan  dissented,  saying  that  it  was  a  tax  on  the 
privilege  of  doing  within  the  limits  of  the  State  the  business  of  an  inter- 
state carrier  of  telegraph  messages;  that  it  was  therefore  a  regulation 
of  interstate  commerce,  and  that  this  characteristic  of  the  tax  was  not 
affected  by  the  question  whether  the  amount  was  more  or  less  than  it 
would  have  been  if  it  had  been  levied  on  an  ad  valorem  basis. 


^  216      TAXATION  OF  INTERSTATE  CARRIERS.         237' 

commerce  or  for  the  carrying  on  of  such  commerce ;  but  the 
value  of  property  results  from  the  use  to  which  it  is  put 
and  varies  "with  the  profitableness  of  that  use,  and  by 
whatever  name  the  exaction  may  be  called,  if  it  amounts 
to  no  more  than  the  ordinary  tax  upon  property  or  a  just 
equivalent  therefor,  ascertained  by  reference  thereto,  it  is 
not  open  to  attack  as  inconsistent  with  the  Constitution."  i 
The  principle  thus  laid  down  by  the  court  would  apply 
to  all  license  taxation  in  any  locality,  whether  levied 
directly  by  the  State  or  by  the  municipality  acting  under 
State  authority.  The  aggregate  tax,  in  whatever  form 
levied,  must  not  exceed  that  which  would  be  levied  under 
ordinary  property  taxation.  In  other  cases  the  fact  that 
property  employed  in  a  business  is  taxed  does  not  preclude 
the  State  from  taxins:  the  business  at  the  same  time.  The 
rule  laid  down  by  the  Supreme  Court  would  seem  to  pre- 
clude this  form  of  double  taxation  upon  interstate  carriers. 

§  216.  Tax  on  interstate   telegraphic    messages    invalid. 

The  State  of  Texas  adopted  another  form  of  license  tax- 
ation, by  imposing  a  tax  of  one  cent  on  every  telegraphic 
message  of  full  rate  and  one-half  cent  for  every  half  rate 
message.  The  Supreme  Court,  reversing  the  Supreme 
Court  of  Texas, ^  decided  that  the  law  imposing  this  tax 
was,  as  to  interstate  messages,  void,  but  that  it  was  valid 
as  to  business  within  the  State.  The  decision  was  placed 
upon  the  ground,  not  only  of  interference  with  interstate 
commerce,  but  also  that  the  telegraph  company,  under  the 
Act  of  Congress,  was  a  government  agencjs  and  further 
that  no  tax  could  bo  levied  on  messages  sent  by  govern- 
ment officers  on  the  business  T)f  the  United  States. 

1  Citing  C.  C,  etc;  Ry.  Co.  v.  Backus,  154  U.  S.  439,  445,  infra. 

2  Telegraph  Co.  v.  Texas,  105  U.  S.  460. 


238  TAXATION    OF   INTERSTATE    CARRIERS.  §  218 

§  217.  Privilege  tax  on  sleeping  cars. 

Still  another  form  of  license  or  privilege  taxation  was 
levied  in  Tennessee  and  other  States,  upon"  companies 
leasing  sleeping  cars,  for  the  privilege  of  operating  them. 
This  privilege  tax  was  held  invalid  as  an  interference  with 
interstate  commerce,  when  applied  to  cars  used  in  the  inter- 
state transportation  of  passengers.^  The  State  may  how- 
ever tax  the  privilege  of  operating  sleeping  cars  wholly 
within  its  limits.^ 

§  218.  Compensation  exacted  by  city  for  vise  of  poles  in 
streets  not  regulation  of  commerce. 

A  municipality  may  exact  payment  by  way  of  reasonable 
rental  for  the  occupancy  of  its  streets  by  the  poles  of  a  tel- 
egraph company,  and  this  is  not-  a  license  tax  on  interstate 
commerce.  Thus  an  ordinance  of  the  city  of  St.  Louis 
exacted  the  sum  of  five  dollars  per  annum  for  each  tele- 
graph pole  on  the  streets  of  the  city.  This  was  declared 
invalid  in  the  United  States  Circuit  Court  as  a  regulation 
of  commerce,  but  the  Supreme  Court,  reversing  the  decis- 
ion of  the  Circuit  Court,  sustained  the  tax,^  holding  that  it 
was  not  a  privilege  or  license  tax,  but  was  in  the  nature  of 
a  charge  for  the  use  of  property  belonging  to  the  city  and 
could  properly  be  called  a  rental.  "  A  tax,"  they  said, 
"  is  a  demand  of  sovereignty ;  a  toll  is  a  demand  of  pro- 
prietorship."    It  was  said  however  that  the  reasonableness 

1  Pickard  v.  Pullman  Southern  Car  Co.,  117  U.  S.  34,  overruling 
Pullman  Southern  Car  Co.  v.  Gaines,  3  Tenn.  Ch.  587.  The  court  in 
its  opinion  in  this  case  distinguished  the  case  of  Wiggins  Ferry  Co. 
B.  East  St.  Louis,  supra,  by  saying  that  the  ferryboats  had  a  situs  in 
the  State  for  taxation  and  that  the  exaction  of  a  license  fee  in  respect 
of  them  was  not  a  regulation  of  commerce.     See  supra,  §  195. 

2  Gibson  County  v.  Pullman  Southern  Car  Co.,  42  Fed.  Rep.  572. 
See  also  opinion  of  Mr.  Justice  Matthews  in  Pullman  Southern  Car 
Qo.  V.  Nolan,  22  Fed.  Rep.  276. 

3  St.  Louis  V.  Western  Union  Telegraph  Co.,  148  U.  S.  92. 


§   219  TAXATION    OF    INTEKSTATE    CARRIERS.  239 

of  the  amount  charged  for  the  rental  must  depend  upon 
circumstances,  and  the  case  was  remanded  for  a  new  trial 
on  that  issue. 1 

It  has  since  been  decided  by  the  United  States  Circuit 
Court,  in  a  case  from  Phihidelphia,  that  the  city  had  no 
power  to  impose  upon  a  telegraph  company  doing  inter- 
state business  a  tax  upon  its  poles  and  wires  in  excess  of 
the  reasonable  expense  to  the  city  for  the  inspection  and 
regulation  thereof.  ^  But  it  was  for  the  jury  to  determine 
Avhether  the  amount  was  reasonable,  and  the  city  had  a 
right  to  show  that  additional  expense  was  incurred  by  it  in 
consequence  of  the  wires  suspended  in  the  streets.^ 

§  219.  Payment  reserved  as  bonus  in  railroad  charter  not 
regulation  of  commerce. 

A  (Statute  of  Maryland  granted  to  the  Baltimore  and  Ohio 
Railroad  the  right  to  build  a  branch  from  Baltimore  to 
Washington,  and  to  charge  not  exceeding  $2.50  and  in 
proportion  for  every  shorter  distance,  providing  also  that 
the  company  should  pay  the  State  one-fifth  of  the  whole 
amount  received  from  transportation  of  passengers  every  six 
months.  It  was  claimed  that,  under  the  decision  of  Cran- 
dall  V.  Nevada,  siqjva,  §  20,  this  was  in  eifect  a  tax  upon, 

^  Oa  retrial  in  the  Circuit  Court,  the  charge  was  held  unreasonable 
and  excessive. 

2  Philadelphia  v.  Western  Union  Telegraph  Co.,  82  Fed.  Rep.  797. 

3  Phila.  u.  Atlantic  &  P.  Tel.  Co.,  42  C.  C.  A.  325,  3d  Circuit;  Phila- 
delphia V.  W.  U.  Tel.  Co.,  89  Fed.  Rep.  454;  Philadelphia  v.  Postal  Tel. 
Cable  Co.,  21  N.  Y.  Supp.  556;  Philadelphia  v.  W.  U.  Tel.  Co.,  40  Fed. 
R.  615. 

This  principle  was  applied  in  Ohio,  Bogart  u.  The  State  ("Com.  Pi.), 
20  Weekly  L.  Bui.  458,  where  a  vehicle  license  tax  was  sustained,  which 
required  owners  of  vehicles  to  pay  an  annual  license  fee,  and  provided 
that  the  fees  be  placed  to  the  credit  of  the  street  repairing  department. 
The  court  held  that  this  was  not  an  interference  with  interstate  com- 
aaerce  when  enforced  against  non-resident  owners,  as  it  was  a  compen- 
sation for  the  advantages  and  improved  facilities  afforded  by  the  city. 


240  TAXATION    or    INTERSTATE    CARRIERS.  §   220 

and  an  interference  with,  commerce.  The  court  held,i 
opinion  by  Bradley,  J. ,  that  it  was  not  a  tax  upon  commerce, 
but  was  rather  a  bonus  charged  by  the  State  in  the  charter 
as  a  consideration  for  the  grant,  and  was  not  repugnant  to 
the  Constitution.  The  State  itself  could  have  built  the 
road  and  charged  any  rate  it  chose,  and  it  made  no  differ- 
ence, from  a  Constitutional  point  of  view,  that  it  author- 
ized its  citizens  to  build  it  and  reserved  for  its  own  use  a 
portion  of  the  earnings.  It  was  simply  the  exercise  by  the 
State  of  absolute  control  over  its  own  property  and  pre- 
rogatives. In  answer  to  the  suggestion  that  the  public 
should  have  a  remedy  against  exorbitant  fares  and  freight 
exacted  by  the  State  lines  of  transportation,  for  the  bonus 
would  necessarily  affect  the  charge  upon  the  public  which 
the  donee  of  the  franchise  would  be  obliged  to  impose,  the 
court  said  that  the  same  difficulty  is  found  in  exorbitant 
charges  by  steamship  lines,  but  that  the  only  remedy  is  in 
competition. 

§  220.  Taxation  of  rolling  stock. 

The  taxation  of  railroad  cars,  which  are  continually  in 
transit  from  State  to  State,  presented  a  perplexing  problem, 
because  it  was  claimed  that  they  had  no  taxable  situs  in 
any  of  the  States  wherein  they  were  employed  and  through 
which  they  passed  as  instruments  of  interstate  commerce. 
The  taxation  of  the  privilege  of  operating  the  cars  was 
sought  to  be  enforced  for  this  reason,  but  was  adjudged 
invalid  as  a  direct  interference  with  interstate  commerce. ^ 
It  was  claimed  that  such  property  had  no  taxable  situs  ex- 

1  Railroad  Co.  v.  Maryland,  21  Wallace,  456.  Justice  Miller  dissented, 
saying  that  in  his  opinion  the  statute  was  void  under  the  decision  in 
Crandall  v.  Nevada,  sitpra,  §  20. 

2  See  Picliard  v.  Pullman  Southern  Car  Co.,  supra,  §  217. 


§   221  TAXATION    OF    INTERSTATE    CARRIERS.  241 

cept  at  the  terminus  of  the  line,  although  the  cars  were 
continually  in  transit  through  that  and  other  States. 

The  difficulty  was  finally  solved  by  adopting  definitely 
the  principle  of  taxing  the  average  number  of  cars  in 
habitual  use  in  the  State  during  the  year. 

§  221.  Rule  of  average  of  habitual  use  adopted. 

The  subject  of  the  ta^ition  of  rolling  stock  was  first 
considered  by  the  Supreme  Court  in  the  case  of  the  Balti- 
more &  Ohio  Railroad,  where  the  judgment  of  the  lower 
court  enjoining  the  sale  of  certain  engines  and  cars  levied 
upon  by  a  taxing  officer  of  the  State  of  Virginia  was  af- 
firmed.^ Tlie  court,  although  holding  that  the  statute  of 
Virginia  did  not  authorize  the  particular  tax  sought  to  be 
levied,  said,  page  123  :  — 

*'If  the  Baltimore  and  Ohio  Railroad  Company  is  per- 
mitted by  the  State  of  Virginia  to  bring  into  its  territory 
and  there  habitually  to  use  and  employ  a  portion  of  its 
movable  personal  property,  and  the  railroad  company 
chooses  so  to  do,  it  would  certainly  be  competent  and  legit- 
imate for  the  State  to  impose  upon  such  property,  thus 
used  and  employed,  its  fair  share  of  the  burdens  of  taxa- 
tion imposed  upon  other  similar  property  used  in  the  like 
way  by  its  own  citizens.  And  such  a  tax  might  be  properly 
assessed  and  collected  in  cases  like  the  present  where  the 
specific  and  individual  items  of  property  so  used  and  em- 
ployed were  not  continuously  the  same,  but  were  constantly 
changing,  according  to  the  exigencies  of  th'e  business.  In 
such  cases  the  tax  might  be  fixed  by  an  appraisement  and 
valuation  of  the  average  amount  of  the  property  thus 
habitually  used,  and  collected  by  distraint  upon  any  portion 
that  might  at  any  time  be  found.  Of  course,  the  lawful- 
ness of  a  tax  upon  vehicles  of  transportation  used  by  com- 

1  Marye  v.  Baltimore  &  Ohio  R.  R.  Co.,  127  U.  S.  117. 

16 


242        TAXATION  OF  INTERSTATE  CARRIERS.       §  221 

mon  carriers  might  have  to  be  considered  in  particular 
instances  with  reference  to  its  operation  as  a  regulation  of 
commerce  among  the  States,  but  the  mere  fact  that  they 
were  employed  as  vehicles  of  transportation  in  the  inter- 
chansre  of  interstate  commerce  would  not  render  their  tax- 
ation  invalid." 

The  principle  thus  recognized  by  the  court  has  been 
applied  in  a  number  of  cases,  particularly  with  reference 
to  sleeping  cars,  refrigerator  cars  and  the  like,  owned  by 
independent  companies  and  leased  to  railroads. 

The  State  of  Pennsylvania  imposed  a  tax  on  the  Pull- 
man Palace  Car  Company,  taking  as  the  basis  of  the 
assessment  such  proportion  of  the  capital  of  the  com- 
pany as  the  number  of  miles  of  railroad,  over  which 
the  cars  passed  in  the  State  of  Pennsylvania,  bore  to 
the  whole  number  of  miles  in  that  and  other  States  over 
which  its  cars  were  run.  It  was  strongl}'^  contended  that 
the  cars  could  be  taxed  only  in  the  State  of  Illinois, 
where  the  car  company  was  organized  and  had  its  principal 
place  of  business.  But  the  tax  was  sustained  both  by  the 
Supreme  Court  of  Pennsylvania^  and  by  the  Supreme 
Court  of  the  United  States. ^  The  latter  court  said,  at 
page  22 :  — 

"  No  general  principles  of  law  are  better  settled,  or 
more  fundamental,  than  that  the  legislative  power  of 
every  State  extends  to  all  property  within  its  borders, 
and  that  only  so  far  as  the  comity  of  that  State  allows  can 
such  property  be  affected  by  the  law  of  any  other  State. 
The  old  rule,  expressed  in  the  maxim  mobilia  sequunfur 
perso7iam^  by  which  personal  property  was  regarded  as 
subject  to  the  law  of  the  owner's  domicil,  grew  up  in  the 
Middle    Ages,  when  movable  property    consisted    chiefly 

1  107  Pennslvania,  156. 

2  PuUmau's  Palace  Car  Co.  v.  Pennsylvania,  141  U.  S.  18. 


§   222  TAXATION    OF    INTERSTATE    CARRIERS.  243 

of  gold  and  jewels,  which  could  be  easily  carried  by  the 
owner  from  place  to  place,  or  secreted  in  spots  known 
only  to  himself.  In  modern  times,  since  the  great  increase 
in  the  amount  and  variety  of  personal  property,  not 
immediately  connected  with  the  person  of  the  owner, 
that  rule  has  yielded  more  and  more  to  the  lex  situs,  the 
law  of  the  place  where  the  property  is  kept  and  used." 

§  222.  Supreme  Court  ou  taxable  situs  of  railroad  cars. 

In  answer  to  the  argument  that  the  rule  ought  to  be 
the  same  as  that  applicable  to  vessels,  which  are  only 
taxable  at  the  home  port,  the  court  replied  that  there  is 
an  obvious  distinction  between  the  case  of  vessels,  and 
that  of  cars  which  have  no  fixed  sifus  and  traverse  the 
land  only,  continuing  at  page  24:  — 

<' No  doubt  commerce  by  water  was  principally  in  the 
minds  of  those  who  framed  and  adopted  the  Constitution, 
although  both  its  language  and  spirit  embrace  commerce 
by  land  as  well.  Maritime  transportation  requires  no 
artificial  roadway.  Nature  has  prepared  to  hand  that  por- 
tion of  the  instrumentality  employed.  The  navigable 
waters  of  the  earth  are  recognized  public  highways  of  trade 
and  intercourse.  No  franchise  is  needed  to  enable  the 
navigator  to  use  them.  Again,  the  vehicles  of  commerce 
by  water  lacing  instruments  of  intercommunication  with 
other  nations,  the  regulation  of  them  is  assumed  by  the 
national  legislature.  So  that  State  interference  with  trans 
portation  by  water,  and  especially  by  sea,  is  at  once  clearly 
marked  and  distinctly  discernible.  But  it  is  different  with 
transportation  by  land." 

The  court  said,  after  reviewing  the  cases,  that  this  was 
neither  a  license  nor  a  privilege  tax,  nor  a  tax  on  the  bus- 
iness or  occupation,  nor  yet  a  tax  on,  or  because  of,  the 
transportation  or  the  right  of  transit  of  persons  or  prop- 
erty through  the  State  to  other  States  or  countries.     It 


244  TAXATION    OF    INTERSTATE    CARRIERS.  §    222 

was  imposed  equally  on  foreign  and  domestic  companies. 
A  tax  on  the  capital  of  a  corporation,  on  account  of  its 
j^roperty  within  the  State,  is,  in  substance  and  effect,  a  tax 
on  that  propert}^  The  court  added,  with  reference  to  the 
jurisdiction  of  the  State  in  taxation,  pp.  25,  26:  — 

*'  The  cars  of  this  company  within  the  State  of  Penn- 
sylvania are  employed  in  interstate  commerce ;  but  their 
being  so  emploj^ed  does  not  exempt  them  from  taxation  by 
the  State ;  and  the  State  has  not  taxed  them  because  of 
their  being  so  employed,  but  because  of  their  being  within 
its  territory  and  jurisdiction.  The  cars  were  continuously 
and  permanently  employed  in  going  to  and  fro  upon 
certain  routes  of  travel.  If  they  had  never  passed 
beyond  the  limits  of  Pennsylvania,  it  could  not  be  doubted 
that  the  State  could  tax  them,  like  other  property  within 
its  borders,  notwithstanding  they  were  employed  in  inter- 
state commerce.  The  fact  that,  instead  of  stopping  at  the 
State  boundary,  they  cross  that  boundary  in  going  out  and 
coming  back,  cannot  affect  the  power  of  the  State  to  levy  a 
tax  upon  them.  The  State,  having  the  right,  for  the  pur- 
poses of  taxation,  to  tax  any  personal  property  found  within 
its  jurisdiction,  without  regard  to  the  place  of  the  OAvner's 
domicil,  could  tax  the  specific  cars  which  at  a  given  mo- 
ment were  within  it  borders.  The  route  over  which  the 
cars  traveled  extending  beyond  the  limits  of  the  State, 
particular  cars  may  not  remain  within  the  State ;  but  the 
company  has  at  all  times  substantially  the  same  number  of 
cars  within  the  State,  and  continuously  and  constantly  uses 
there  a  portion  of  its  property;  and  it  is  distinctly  found, 
as  matter  of  fact,  that  the  company  continuously,  through- 
out the  periods  for  which  these  taxes  were  levied,  carried  on 
business  in  Pennsylvania,  and  had  about  one  hundred  cars 
within  the  State. 

"  The  mode  which  the  State  of  Pennsylvania  adopted, 
to  ascertain  the  proportion  of  the  company's  property  upon 


§  222      TAXATION  OF  INTEKSTATE  CARRIERS.        245 

which  it  should  be  taxed  in  that  State,  was  by  taking  as  a 
basis  of  assessment  such  proportion  of  the  capital  stock  of 
the  company  as  the  number  of  miles  over  which  it  ran  cars 
within  the  State  bore  to  the  whole  number  of  miles,  in  that 
and  other  States,  over  which  its  cars  were  run.  This  was 
a  just  and  equitable  method  of  assessment;  and,  if  it  were 
adopted  by  all  the  States  through  which  these  cars  ran,  the 
company  would  be  assessed  upon  the  whole  value  of  its 
capital  stock,  and  no  more." 

And  the  court  concluded,  p.  29  :  — 

"  For  these  reasons,  and  upon  these  authorities,  the 
court  is  of  opinion  that  the  tax  in  question  is  constitu- 
tional and  valid.  The  result  of  holding  otherwise  would 
be  that,  if  all  the  States  should  concur  in  abandoning  the 
legal  fiction  that  personal  property  has  its  situs  at  the 
owner's  domicil,  and  in  adopting  the  system  of  taxing  it  at 
the  place  at  which  it  is  used  and  by  whose  laws  it  is  pro- 
tected, property  employed  in  any  business  requiring  con- 
tinuous and  constant  movement  from  one  State  to  another 
would  escape  taxation  altogether."  ^ 

1  Strong  dissent  was  made  by  Justice  Bradley,  with  whom  concurred 
Justices  Field  and  Harlan.     He  said,  1.  c.  page  30:  — 

"  Cerlainly  property  merely  carried  tlirough  a  State  cannot  be  taxed  by 
the  State.  Such  a  tax  would  be  a  duty  —  which  a  State  cannot  impose.  If 
a  drove  of  cattle  is  driven  through  Pennsylvania  from  Illinois  to  New 
York,  for  the  purpose  of  being  sold  in  New  York,  whilst  in  Pennsylvania 
it  may  be  subject  to  the  police  regulations  of  the  State  but  it  is  not  sub- 
ject to  taxation  there.  It  is  not  generally  subject  to  the  laws  of  the 
State  as  other  property  is.  St)  if  a  train  of  cars  starts  at  Cincinnati  for 
New  York  and  passes  through  Pennsylvania,  it  may  be  subject  to  the 
police  regulations  of  that  State  whilst  within  it,  but  it  would  be  repug- 
nant to  the  Constitution  of  the  United  States  to  tax  it.  We  have  de- 
cided this  very  question  in  the  case  of  State  Freight  Tax,  15  Wall.  232. 
The  point  was  directly  raised  and  decided  that  property  on  its  passage 
through  a  State  in  the  course  of  iuterstate  commerce  cannot  be  taxed 
by  the  State,  because  taxation  is  incidentally  regulation,  and  a  State  can- 
not regulate  interstate  commerce.  The  same  doctrine  was  recognized  ia 
Coer.  Errol,  116  U.S.  517.'» 


246        TAXATION  OF  INTERSTATE  CARRIERS.       §  223 

§  223.  Taxation  of  refrigerator  cars. 

This  principle  has  been  followed  in  other  cases.  Thus 
a  tax  levied  on  this  same  basis  of  the  average  number  in 
habitual  use  in  the  State,  was  sustained  in  the  case  of  the 
cars  of  the  American  Eefrigerator  Transit  Company  in  the 
State  of  Colorado.  It  was  claimed  that  the  cars  had  no 
situs  for  taxation  in  the  State,  because  the  company  was  an 
Iowa  corporation  and  had  no  office  or  place  of  business  in 
Colorado.  The  average  number  of  cars  used  in  the  State 
was  forty.  The  tax  was  affirmed  both  in  the  State  court 
and  in  the  Supreme  Court, ^  the  latter  saying,  1.  c.p.  81 :  — 

"  It  having  been  settled,  as  we  have  seen,  that  where  a 
corporation  of  one  State  brings  into  another,  to  use  and 
employ  a  portion  of  its  movable  personal  propert}^  it  is 
legitimate  for  the   latter   to  impose  upon  such  property, 

After  reviewing  other  decisions,  he  insisted  that,  although  such  cars 
are  not  to  be  free  from  taxation,  any  more  than  ships,  yet  they  are  not 
taxable  by  the  States  in  which  they  are  only  transiently  present  in  carry- 
ing on  their  commercial  operations.     He  said,  at  page  33:  — 

"  In  the  opinion  of  the  court  it  is  suggested  that  if  all  the  States  should 
adopt  as  equitable  a  rule  of  proportioning  the  taxes  on  the  Pullman 
company  as  that  adopted  by  Pennsylvania,  a  just  system  of  taxation  of 
the  whole  capital  stock  of  the  company  would  be  the  result.  Yes,  if —  ! 
But  Illinois  may  tax  the  company  on  its  whole  capital  stock.  Where 
-would  be  the  equity  then?  This,  however,  is  a  consideration  that  cannot 
be  compared  with  the  question  as  to  the  power  to  tax  at  all,  —  as  to  the 
relative  power  of  the  State  and  general  governments  over  the  regulation 
of  internal  commerce, —  as  to  the  right  of  the  States  to  resume  those 
powers  which  have  been  vested  in  the  government  of  the  United  States." 

See  also  Pullman's  Car  Co.  v.  Hayward,  141  U.  S.  36,  sustaining  the 
property  tax  upon  railroad  cars  levied  upon  the  same  principle  of  the 
average  number  in  habitual  use,  the  tax  being  apportioned  to  the  counties 
of  the  State  on  the  mileage  basis. 

1  American  Refrigerator  Transit  Co.  v.  Hall,  174  U.S.  70;  Union 
Refrigerator  Transit  Co.  v.  Lynch,  177  U.  S.  149,  applying  the  same 
rule  in  the  case  of  the  taxation  of  cars  of  a  Kentucky  corporation  in 
Utah.  See  also  Pullman's  Palace  Car  Co.  v.  Twombley,  29  Fed.  Rep. 
658,  opinion  by  Brewer,  J.,  holding  valid  the  Iowa  statute;  also  Board 
of  Assessors  v.  Pullman's  Palace  Car  Co.,  8  C.  C.  A.  490, 


§  225      TAXATION  OF  INTERSTATE  CARRIERS.         247 

thus  used  and  emploj^ed,  its  fair  share  of  the  burdens  of 
taxation  imposed  upon  similar  property  used  in  like  way 
by  its  own  citizens,  we  think  that  such  a  tax  may  be  prop- 
erly assessed  and  collected,  in  cases  like  the  present,  where 
the  specific  and  individual  items  of  property  so  used  and 
employed  were  not  continuously  the  same,  but  were  con- 
stantly changing,  according  to  the  exigencies  of  the  busi- 
ness, and  that  the  tax  may  be  fixed  by  an  appraisement 
and  valuation  of  the  average  amount  of  the  property  thus 
habitually  used  and  employed." 

§  224.  Mileage    apportionment    in    taxation    of    rolling 
stock. 

In  the  application  of  this  rule  of  average  of  habitual  use 
to  the  taxation  of  sleeping  cars  and  other  forms  of  rolling 
stock,  there  was  necessarily  involved  the  recognition  of 
the  principle  of  mileage  apportionment  as  between  the  dif- 
ferent. States  in  the  railway  system.  The  same  principle 
has  been  applied  in  different  State  systems  of  taxation  of 
such  property.  The  total  assessed  value  of  the  average 
number  of  cars  in  habitual  use  in  the  State  having  been  as- 
certained,  this  amount  is  apportioned  to  the  different 
counties  or  cities  along  the  line  of  the  railroad  in  the  State. 
This  has  been  held  a  valid  method  of  taxation,  both  by  the 
State  and  Federal  courts,  see  infra,  §  239  et  seq.^ 

§  225.   State  tax  on  freight  invalid. 

The  taxation  of  corporations  on  the  basis  of  their  gross 
receipts,  having  the  advantage  of  simplicity  and  efficiency 
and  being  in  effect  a  corporation  income  tax,  has  been 
adopted  in  many  States  with  reference  to  domestic  corpora- 

1  For  decision  of  a  State  court  holding  that  cars  of  the  Armour  Pack- 
ing Company  have  a  taxable  situs  only  at  the  domicil  of  the  corporation 
owning  the  cars,  see  State  ex  rel.  v.  Stephens,  146  Mo.  662. 


248        TAXATION  OF  INTERSTATE  CARRIERS.       §  226 

tions,  particularly  when  engaged  in  quasi  public  business. 
The  application  of  this  principle  to  interstate  corporations 
however  encountered  the  difficulty,  that  the  taxation  of  the 
receipts  of  interstate  commerce  is  in  effect  taxing  inter- 
state commerce  itself,  and  thus  placing  the  conduct  of  it 
under  State  control. 

The  difficulty  was  illustrated  in  two  cases  decided  in  1872, 
both  from  Penns3dvania,  one  known  as  the  State  Freight 
Tax  Case,  and  the  other  as  the  State  Tax  on  Eailway  Gross 
Receipts.  In  the  former, i  a  tax  levied  by  the  State  of 
Pennsylvania  upon  the  freight  carried  by  railroads  into  or 
from  or  throuirh  the  State,  at  the  rate  of  a  definite  sum 
upon  each  ton  of  freight,  was  declared  void  as  an  interfer- 
ence with  interstate  commerce.  The  court  said  that  com- 
merce, as  used  in  the  Constitution,  includes  not  only  traffic 
but  intercourse  and  navigation,  and  that,  if  the  State  could 
tax  a  ton  of  freight  at  all,  it  could  tax  it  so  heavily  as 
would  make  interchange  of  commodities  between  the  States 
impossible. 

§  226.  State  tax  on  railway  gross  receipts. 

In  the  other  case,  a  tax  of  three-fourths  of  one  per  cent, 
levied  by  the  State  of  Pennsylvania  u})on  the  gross  earn- 
ings of  every  railroad  incorporated  under  its  laws  and  not 
liable  to  an  income  tax  under  existing  lawSj^was  adjudged 
valid.  In  that  case  the  tax  was  resisted  by  the  Philadelphia 
&  Reading  Railroad  Company,  a  Pennsylvania  corporation 
whose  road  lay  between  Philadelphia  and  the  coal  regions 
of  the  State.  This  company  claimed  that  a  large  source  of 
its  profit  was  derived  from  the  transportation  of  coal  to 
places  from  which  most  of  it  went  to  States  other  than  Penn- 
sylvania. But  the  court  said ^  that  this  case  was  to  be  distin- 

1  15  Wallace,  232,  Justices  Swayne  and  Davis  dissenting. 

2  15  Wallace,  284,  Justices  Miller,  Field  and  Hunt  dissenting. 


§  226      TAXATION  OF  INTERSTATE  CARRIERS.         249 

guished  from  that  of  the  State  freight  tax.  It  is  not  every- 
thing; that  affects  commerce  that  amounts  to  a  reo-ulation  of 
it  within  the  meaning  of  the  Constitution.  The  States  have 
authority  to  tax  the  assets,  real  and  personal,  of  all  their 
corporations,  including  carrying  companies,  precisely  as 
they  may  tax  similar  property  belonging  to  natural  persons, 
and  to  the  same  extent.  The  court  said  further,  at  page 
293:  — 

*'  We  think  also  that  such  tax  may  be  laid  upon  a  valua- 
tion, or  may  be  an  excise,  and  that  in  exacting  an  excise 
tax  from  their  corporations,  the  States  are  not  obliged  to 
impose  a  fixed  sum  upon  the  franchises  or  upon  the  value 
of  them,  but  they  may  demand  a  graduated  contribution, 
proportioned  either  to  the  value  of  the  privileges  granted, 
or  to  the  extent  of  their  exercise,  or  to  the  results  of  such 
exercise." 

The  court  said  that,  when  the  tax  was  laid  upon  gross 
receipts,  these  receipts  had  lost  their  distinctive  character 
as  freight  by  becoming  incorporated  into  the  general  mass 
of  the  company's  property,  1.  c.  page  295  :  — 

' '  There  certainly  is  a  line  which  separates  that  power  of 
the  Federal  government  to  reo;ulate  commerce  among  the 
States,  which  is  exclusive,  from  the  authority  of  the  States 
to  tax  persons'  property,  business,  or  occupations,  within 
their  limits.  The  line  is  sometimes  difiicult  to  define  with 
distinctness.  It  is  so  in  the  present  case;  but  we  think  it 
may  safely  be  laid  down  that  the  gross  receipts  of  raih'oad 
or  canal  companies,  after  they  have  reached  the  treasury 
of  the  carriers,  though  they  may  have  been  derived  in  part 
from  transportation  of  freight  between  States,  have  become 
subject  to  legitimate  taxation." 

It  seems  to  have  been  conceded  that  a  State  can  levy  a 
tax  upon  net  earnings,  and  the  court  said  that  it  is  difiicult 
to  state  any  well-founded  distinction  between  a  State  tax 
upon  net  earnings  and  one  upon  gross  earnings,  that  net 


250        TAXATION  OF  INTERSTATE  CARRIERS.       §  227 

earnings  are  a  part  of  the  gross  receipts,  and  that  the  gross 
receipts  are  a  measure  of  approximate  value. 

Neither  of  these  cases  has  been  overruled;  but  the 
authority  of  the  decision  in  the  case  of  the  State  Tax  on 
Gross  Receipts  was  for  a  time  seriously  impaired  by  decis- 
ions of  the  court  apparently  inconsistent  with  the  broad 
statement  therein  of  the  right  to  tax  gross  receipts,  on- the 
o-round  that  they  have  passed  into  the  treasury  of  the 
company  and  lost  their  distinctive  character  as  freight.^ 

It  will  be  noticed  that  the  mileage  rule  of  apportionment 
of  interstate  properties  was  not  suggested  or  considered  in 
the  case  of  the  State  Tax  on  Gross  Receipts.  The  case 
presented  was  that  of  a  railroad  whose  line  was  entirely 
within  the  State,  but  which  did  an  interstate  business 
throuofh  its  connections  with  other  lines  leading  out  of  the 
State. 

§  227.  Mileage  apportionment  in  interstate  railway  tax- 
ation. 

In  a  later  case,  which  seems  to  have  been  the  first  case 
before  the  Supreme  Court  involving  the  taxation  of  an  in- 
terstate railroad  2  as  such,  the  court  sustained  the  tax 
levied  by  the  State  of  Delaware  upon  the  Philadelphia, 
Wilmington  &  Baltimore  Railroad  Company,  a  through 
line  connecting  the  cities  of  Baltimore  and  Philadelphia,  of 
which  that  part  in  Delaware  had  been  built  by  a  Delaware 
corporation,  which  had  been  consolidated  with  the  corpo- 
rations in  the  other  States  of  Pennsylvania  and  Maryland. 
The  act  provided  that  a  tax  of  one-fourth  of  one  per  cent 
should  be  levied  upon  the  actual  cash  value  of  every  share 
of  the  capital  stock  of  all  railroad  and   canal   companies, 

1  See  Steamship  Co.  v.  Pennsylvania,  122  U.  S.  326;  Fargo  v.  Mich- 
igau,  121  U.  S.  230. 

'^  Delaware  Railroad  Tax,  18  Wallace,  206,  decided  in  1873. 


§  228  TAXATION    OF    INTERSTATE    CARRIERS.  251 

provided  however  that,  in  the  case  of  an  interstate  raih-oad, 
the  company  shonld  only  be  required  to  pay  the  tax  on 
such  part  of  the  shares  of  its  capital  stock  as  should  be  in 
that  proportion  to  the  whole  number  of  shares,  which  the 
length  of  the  road  within  the  State  should  bear  to  the 
whole  length.  It  was  claimed  that  this  was  an  attempted 
taxation  of  property  beyond  the  jurisdiction  of  the  State, 
and  thiit  there  was  no  relation  between  the  capital  invested 
and  the  number  of  shares  of  the  company  owned  in  the 
State.  But  the  court  replied  that  the  tax  was  not  upon  the 
shares,  nor  upon  the  property  of  the  corporation,  but  a  tax 
upon  the  corporation,  measured  b}'  a  percentuge  upon  the 
cash  value  of  a  certain  proportional  part  of  the  shares,  and 
that,  although  the  rule  was  arbitrary,  it  was  approximately 
just,  and  one  which  the  legislature  had  the  right  to  adopt. 
It  said,  at  page  231 :  — 

*'  The  State  may  impose  taxes  upon  the  corporation  as 
an  entity  existing  under  its  laws,  as  well  as  upon  the  cap- 
ital stock  of  the  corporation,  or  its  separate  corporate 
property.  And  the  manner  in  which  its  value  shall  be  as- 
sessed and  the  rate  of  taxation,  however  arbitrary  or 
capricious,  are  mere  matters  of  legislative  discretion." 

§  228.  Taxation  of  net  earnings  sustained. 

A  tax  of  three  per  cent  was  also  levied  under  this  act 
upon  the  net  earnings  of  the  company,  or  the  income  re- 
ceived from  all  sources  during  the  preceding  year,  and  this 
also  was  adjusted  on  the  mileage  rule,  such  shares  only  of 
the  net  earnings  being  subject  to  the  tax  as  were  in  the  pro- 
portion to  the  whole  net  earnings  which  the  length  of  the 
road  within  the  State  bore  to  the  whole  length.  As  to  this 
the  court  said,  p.  231 :  — 

"  Nothing  was  urged  in  the  argument  specially  against 
the  tax  upon  the  corporation  under  the  tirst  section  of  the 
act,  which  is  determined,  by  the  net  earnings  or  income  of 


252  TAXATION    OF   INTERSTATE    CARRIERS.  §   229 

the  companj.  Whatever  objections  could  be  presented 
were  answered  by  the  observations  already  made  upon  the 
tax  under  the  other  section.  A  tax  upon  a  corporation  may 
be  proi^ortioned  to  the  income  received  as  well  as  to  the 
value  o-f  the  franchise  granted  or  the  property  possessed.'* 

§  229.  Tax  on  gross  earnings  held  invalid. 

A  series  of  cases  followed  which  held  State  taxes  levied 
upon  gross  earnings  of  transportation  and  telegraph  com- 
panies invalid.  These  cases  did  not  expressly  overrule  the 
case  of  the  State  Tax  on  Gross  Receipts,  siqyra,  §  226,  but 
seem  clearly  inconsistent  with  the  principle  on  which  it  was 
based,  that  the  receipts  from  freight  could  be  taxed,  while 
the  freight  itself  could  not  be  taxed.  This  distinction  was 
directly  denied. 

Thus,  in  1887,  an  act  of  Pennsjdvania  imposing  a  tax 
upon  the  gross  receipts  of  railroad,  canal,  steamboat  and 
other  transportation  companies  was  held  invalid  as  to  a 
steamship  company,  a  Pennsylvania  corporation,  operating 
steamers  between  the  ports  of  Philadelphia  and  Savannah 
and  in  foreign  trade  out  of  New  Orleans. ^  The  court  after 
holding  that  the  interstate  commerce  carried  on  by  ships 
on  the  sea  is  national  in  its  character  admitting  of  only  one 
uniform  system,  said.  Justice  Bradley  delivering  the  unani- 
mous opinion,  at  page  336 :  — 

"If,  then,  the  commerce  carried  on  by  the  plaintiff  in 
error  in  this  case  could  not  be  constitutionally  taxed  by  the 
State,  could  the  fares  and  freights  received  for  transporta- 
tion in  carrying  on  that  commerce  be  constitutionally 
taxed?  If  the  State  cannot  tax  the  transportation,  may  it, 
nevertheless,  tax  the  fares  and  fi'eights  received  therefor? 
Where  is  the  difference?  Looking-  at  the  substance  of 
things,  and  not  at  mere  forms,  it  is  very  difficult  to  see  any 

1  Philadelphia  S'eamship  Co.  v.  Pennsylvania,  122  U.  S.  326. 


§  229      TAXATION  OF  INTERSTATE  CARRIERS.         253 

difference.  The  one  thinoj  seems  to  be  tantamount  to  the 
other.  It  would  seem  to  be  rather  metaphysics  than  plain 
logic  for  the  State  officials  to  say  to  the  company :  '  We 
will  not  tax  you  for  the  transportation  you  perform,  but 
we  will  tax  you  for  what  3'ou  get  for  performing  it.'  Such 
a  position  can  hardly  be  said  to  be  based  on  a  sound  method 
of  reasoning." 

The  court  commented  at  length  upon  the  cases  of  the 
State  Freight  Tax  and  the  State  Tax  on  Railway  Gross  Re- 
ceipts, supra,  §  225  et  seq.,  and  said  that  if  the  former  stood 
alone  it  would  control  this  case.  It  was  said  further  that 
the  first  ground  on  which  the  decision  of  the  State  Tax  on 
Gross  Receipts  was  placed  was  not  tenable,  that  is,  that  the 
receipts  from  freight  had  been  collected  into  the  treasury  of 
the  company  and  were  no  longer  distinguishable  as  receipts. 
The  opinion  proceeds,  at  page  342 :  — 

*'  No  doubt  a  ship-owner,  like  any  other  citizen,  may  be 
personally  taxed  for  the  amount  of  his  property  or  estate, 
without  regard  to  the  source  from  which  it  was  derived, 
whether  from  commerce,  or  banking,  or  any  other  employ- 
ment. But  that  is  an  entirely  different  thing  from  laying 
a  special  tax  upon  his  receipts  in  a  particular  employment. 
If  such  a  tax  is  laid,  and  the  receipts  taxed  are  those  de- 
rived from  transporting  goods  and  passengers  in  the  way 
of  interstate  or  foreign  commerce,  no  matter  when  the  tax 
is  exacted,  whether  at  the  time  of  realizing  the  receipts,  or 
at  the  end  of  every  six  months  or  a  3'ear,  it  is  an  exaction 
aimed  at  the  commerce  itself,  and  is  a  burden  upon  it,  and 
seriously  affects  it.  A  review  of  the  question  convinces  us 
that  the  first  ground  on  which  the  decision  in  State  Tax  on 
Railway  Gross  Receipts  was  placed  is  not  tenable ;  that  it 
is  not  supported  by  anything  decided  in  Brown  v.  Mary- 
land; but,  on  the  contrary,  that  the  reasoning  in  that  case 
is  decidedly  against  it . " 

It  was  intimated  however  that  the  decision  in  the  Rail- 


254        TAXATION  OF  INTERSTATE  CARRIERS.       §  229 

way  Gross  Receipts  Case  could  be  based  upon  the  second 
ground  stated  in  the  opinion  therein,  to  wit,  that  it  was  a 
tax  on  the  franchise  of  the  corporation.  But  that  consid- 
eration was  inapplicable  to  the  case  of  the  steamship  com- 
pany. The  court  declared  that  the  tax  was  not  an  income 
tax,  as  it  was  not  levied  on  the  incomes  of  all  the  inhabi- 
tants of  the  State,  but  was  a  special  tax  levied  on  the 
transportation  companies. 

At  the  previous  term,  the  court  had  held  invalid  a  tax 
levied  by  the  State  of  Michigan  upon  the  gross  receipts  of 
the  Merchants  Dispatch  Transportation  Company. i  The 
cars  in  that  case  were  owned  by  the  transportation  com- 
pany and  leased  to  the  railroads,  which  operated  them. 
The  company  was  a  New  York  corporation,  and  the  tax 
finally  assessed  against  it  was  for  the  gross  receipts,  which 
it  had  returned  as  the  money  received  from  the  transport- 
ation of  freight  from  points  without  to  points  within  the 
State,  and  from  points  within  to  points  without.  No  tax  was 
levied  upon  the  amount  received  for  transportation  passing 
entirely  through  the  State  to  and  from  without.  The  court 
said  there  was  nothing  in  the  statute  on  which  to  base  this 
distinction,  and  therefore  it  must  have  been  made  upon 
some  idea  of  the  authorities  of  the  State  that  the  one  was 
interstate  commerce  and  the  other  was  not,  which  the 
court  was  at  a  loss  to  comprehend,  as  there  was  no  such 
difference.  It  would  seem  from  the  statement  of  facts 
that  the  tax  was  apportioned  according  to  the  mileage  in 
the  State,  but  this  was  not  pressed  by  counsel  nor  con- 
sidered by  the  court.  The  opinion  was  by  Justice  Miller, 
who  had  dissented  from  the  decision  in  the  State  Tax 
on  Railway  Gross  Receipts  Case,  on  which  the  Supreme 
Court  of  Michigan  had  relied  in  sustaining  this  tax.  He 
distinguished  that  case,  first  because  the  subject  of  taxation 

1  Fargo  V.  Michigan,  121  U.  S.  230. 


§  230      TAXATION  OF  INTERSTATE  CARRIERS.        255 

there  was  a  Pennsylvania  corporation  having  the  situs  of  its 
business  within  the  State;  and  secondly,  upon  the  ground 
that  the  assessment  there  was  upon  money  in  the  treasury 
of  the  company,  while  in  the  case  at  bar  the  money  re- 
ceived for  freight  probably  never  was  within  the  State, 
being  paid  to  the  company  either  at  the  beginning  or  end 
of  its  route. 

In  1888  a  tax  levied  by  Ohio  upon  the  gross  receipts  of 
the  Western  Union  Telegraph  Company  was  held  valid  as 
to  the  receipts  from  business  within  the  State,  but  invalid 
as  to  those  from  interstate  business,  and  the  court  there- 
fore sustained  an  injunction  against  the  collection  of  taxes 
upon  the  latter. i  In  this  case  moreover  there  seems  to 
have  been  no  effort  to  apportion  the  receipts  according  to 
the  mileage  in  the  State,  and  the  tax  was  directly  upon  the 
receipts  in  Ohio  of  the  company's  business,  and  not  upon 
the  gross  receipts  of  all  its  business.  The  court,  in  its 
opinion,  refers  to  the  fact  that  at  the  same  term  it  had 
sustained  a  tax  levied  by  the  State  of  Massachusetts  upon 
the  capital  stock  of  the  company,  the  ratio  allotted  beino- 
the  ratio  of  the  mileage  in  the  State  to  the  total  number  of 
miles  of  the  company's  lines  in  the  United  States. ^ 

§  230.  Tax  on  gross  receipts  held  invalid  in  State  conrts. 

These  cases  were  considered  as  impairing  the  authority 
of  the  State  Tax  on  Gross  Eeceipts  Case,  and  the  State 
courts  followed  in  holding  that  method  of  taxation  uncon- 
stitutional, as  to  that  part  of  the  receipts  coming  from 
interstate  commerce. 

Thus  the  Supreme  Court  of  Vermont'  admitted  that  the 

1  Ratterman  v.  Western  Union  Tel.  Co.,  127  U.  S.  411;  Western 
Union  Telegraph  Co.  v.  Alabama,  132  U.  S.  472. 

2  Western  Union  Tel.  Co.  v.  Massachusetts,  125  U.  S.  530,  infra,  §  249. 

3  Vermont  &  Canada  R.  R.  Co.  v.  Vermont  Central  R.  R.  Co.,  (^3  Vt. 
1,  10  L.  R.  A.  565. 


256  TAXATIOX    OF    INTERSTATE    CARRIERS.  §   231 

effect  of  the  decision  in  Philadelphia  Steamship  Co.  v. 
Pennsylvania,  siq^ra,  §  229,  was  to  overrule  the  State  Tax 
on  Gross  Keceipts  Case  and  make  the  law  of  Vermont 
taxing  gross  receipts  unconstitutional  as  to  those  derived 
from  interstate  commerce,  saying :  — 

"  We  as  judges  of  a  State  court  are  bound  by  the  very 
language  of  the  Federal  Constitution  to  accept  the  construc- 
tion of  any  part  of  that  Constitution  made  by  the  Supreme 
Court ;  and  in  this  case  the  reasoning  of  that  court  seems 
to  us  to  be  entirely  unanswerable.  We  hold,  therefore, 
th-at  our  corporation  tax  law,  so  far  as  it  seeks  to  tax  the 
earnings  derived  from  interstate  commerce,  is  unconstitu- 
tional, as  it  interferes  with  commerce,  the  regulation  of 
which  is  within  the  exclusive  control  of  Congress."  ^ 

§  231.  Maine  v.  Grand  Trunk  R.  R.   Co. 

But,  a  few  years  later,  in  1891,  the  right  of  a  State  to 
levy  a  tax  upon  that  portion  of  all  the  gross  earnings  of  an 
interstate  railroad  apportioned  to  the  total  earnings,  as  the 
mileage  in  the  State  is  proportioned  to  the  total  mileage, 
when  levied  as  an  excise  or  franchise  tax  upon  the  corpo- 
ration, was  distinctly  sustained  by  the  Supreme  Court. ^ 
Such  a  tax  was  levied  by  the  State  of  Maine  upon  the  Grand 
Trunk  Eailroad  Company,  a  Canada  corporation,  which  had 
leased  a  railroad  in  Maine  and  operated  it  and  used  its  fran- 
chises under  legishitive  permission.  Under  the  statute  the 
lessee  was  required  to  pay  annually  what  was  entitled  an 

1  The  court  however  held  that  the  lessee  of  a  railroad  could  not  be 
compelled  to  pay  to  the  lessor  the  amount  of  such  tax  thus  adjudged  un- 
constitutional which  it  had  paid  to  the  State  under  its  covenant  to  pay 
taxes  and  accordingly  withheld  from  its  rent,  although  notified  by  the 
lessor  not  to  pay  them,  as  the  taxes  when  paid  were  lawful.  On  appeal 
the  Supreme  Court  dismissed  the  case  for  the  want  of  jurisdiction,  159 
U.  S.  639,  no  Federal  question  being  involved  as  between  the 
parties. 

2  Maine  v.  Grand  Trunk  R.  R.  Co.,  142  U.  S.  217. 


§   232  TAXATION    OF    INTERSTATE    CARRIERS.  257 

excise  tax  for  the  privilege  of  exercising  its  franchise  in 
the  State.  The  amount  of  this  tax  was  calculated  upon  the 
gross  receipts  for  the  preceding  j-ear  on  the  mileage  basis. 
The  gross  receipts  of  the  whole  system  within  and  without 
the  State  were  divided  by  the  total  number  of  miles  oper- 
ated, and,  the  average  gross  receipts  per  mile  having  been 
thus  obtained,  this  amount  was  multiplied  by  the  number 
of  miles  in  Maine  and  the  tax  computed  upon  the  result. 
The  case  was  submitted  to  the  court  upon  the  distinct  issue 
of  the  right  of  the  State  to  levy  such  a  tax.  The  U.  S. 
Circuit  Court  had  held  the  tax  invalid  on  the  ground  that 
the  State  Tax  on  Gross  Receipts  Case  -had  been  over- 
ruled, i 

The  opinion  was  delivered  by  Justice  Field,  reversing  the 
court  below  and  holding  the  tax  valid.  He  said,  pp.  227 
and  228 :  — 

§  232.  Tax  on  gross  earnings,  apportioned   by  mileage, 
valid  as  excise  tax. 

"  The  tax,  for  the  collection  of  which  this  action  is 
brought,  is  an  excise  tax  upon  the  defendant  corporation 
for  the  privilege  of  exercising  its  franchises  within  the 
State  of  Maine.  It  is  so  declared  in  the  statute  which  im- 
poses it ;  and  that  a  tax  of  this  character  is  within  the 
power  of  a  State  to  levy  there  can  be  no  question.  The 
designation  does  not  always  indicate  merely  an  inland  im- 
position or  duty  on  the  consumption  of  commodities,  but 
often  denotes  an  impost  for  a  license  to  pursue  certain  call- 
ings or  to  deal  in  special  commodities,  or  to  exercise 
particular  franchises.^     It  is  used  more  frequently,  in  this 

1  The  reported  brief  of  Mr.  Littlefleld,  Attorney-General,  contains  a 
clear  analysis  of  the  cases  theretofore  decided  and  the  issue  submitted 
to  the  court. 

^  For  construction  of  the  term  "  excise  "  in  Federal  taxation  see 
infra,  §  485. 

17 


258        TAXATION  OF  INTERSTATE  CARRIERS.       §  232 

country,  in  the  latter  sense  than  in  any  other.  The  privi- 
lege of  exercising  the  franchises  of  a  corporation  within 
a  State  is  generally  one  of  value,  and  often  of  great  value, 
and  the  subject  of  earnest  contention.  It  is  natural, 
therefore,  that  the  corporation  should  be  made  to  bear 
some  proportion  of  the  burdens  of  government.  As  the 
granting  of  the  privilege  rests  entirely  in  the  discretion  of 
the  State,  whether  the  corporation  be  of  domestic  or  f  oreio:n 
origin,  it  may  be  conferred  upon  such  conditions,  pecuniary 
or  otherwise,  as  the  State  in  its  judgment  may  deem  most 
conducive  to  its  interests  or  policy.  It  may  require  the 
payment  into  its  treasury,  each  year,  of  a  specific  sum,  or 
may  apportion  the  amount  exacted  according  to  the  value 
of  the  business  permitted,  as  disclosed  by  its  gains  or 
receipts  of  the  present  or  past  years.  The  character  of  the 
tax,  or  its  validity,  is  not  determined  by  the  mode  adopted 
in  fixing  its  amount  for  any  specific  period  or  the  times  of 
its  payment.  The  whole  field  of  inquiry  into  the  extent  of 
revenue  from  sources  at  the  command  of  the  corporation, 
is  open  to  the  consideration  of  the  State  in  determining 
what  may  be  justly  exacted  for  the  privilege.  The  rule  of 
apportioning  the  charge  to  the  receipts  of  the  business  would 
seem  to  be  eminently  reasonable,  and  likely  to  produce  the 
most  satisfactory  results,  both  to  the  State  and  the  cor- 
poration taxed." 

The  opinion  further  said  that  the  Circuit  Court  erred  in 
holding  that  the  tax  was  upon  the  receipts  as  such,  and 
therefore  an  interference  with  interstate  and  foreign  com- 
merce. The  resort  to  the  receipts  was  simply  to  ascertain 
the  value  of  the  business  done  by  the  company ;  and  the 
effect  was  the  same  as  if  the  reference  had  been  to  results 
of  former  years.  There  was  no  levy,  by  the  statute,  on 
the  receipts  themselves,  either  in  form  or  fact,  as  they  con- 
stituted simply  the  means  of  ascertaining  the  value  of  the 
privilege  confen*ed. 


§   238  TAXATION    OF    INTERSTATE    CARRIERS.  259 

The  court  also  said  that  the  case  of  the  Phihidelphia 
Steamship  Co.  v.  Pennsylvania!  j^  no  way  conflicted  with 
that  decision."'^ 


§  233.  Principle  reaffirmed. 

The  principle  thus  established,  that  the  gross  receipts  of 
an  interstate  carrier  may  be  taxed  by  the  State  when  the 
tax  is  levied  as  an  excise  or  franchise  tax,  and  apportioned 


^  Supra,  Sec.  229. 

2  Four  judges  concurred  with  Justice  Field  in  this  opinion,  Chief 
Ju!>tice  Fuller,  and  Justices  Gray,  Blatchford  and  Brewer,  while  four 
judges  dissented,  Justices  Bradley,  Harlan,  Lamar  and  Brown.  The 
dissenting  opinion  by  Justice  Bradley  was  the  last  reported  opinion  of 
that  distinguished  jurist.  In  it  he  said:  "This  court  and  some  of  the 
State  courts  have  gone  a  great  length  in  sustaining  various  forms  of 
taxes  upon  corporations.  The  train  of  reasoning  upon  which  it  is 
fouuded  may  be  questionable.  A  corporation,  according  to  this  class  of 
decisions,  may  be  taxed  several  times  over.  It  may  be  taxed  for  its 
charter;  for  its  franchises;  for  the  privilege  of  carrying  on  its  business; 
it  may  be  taxed  on  its  capital;  and  it  may  be  taxed  on  its  property. 
Each  of  these  taxations  may  be  carried  to  the  full  amount  of  the  prop- 
erty of  the  company.  I  do  not  know  that  jealousy  of  corporate  insti- 
tutions could  be  carried  much  further.  This  court  held  that  the  taxa- 
tion of  the  capital  stock  of  the  Western  Union  Telegraph  Company  in 
Massachusetts,  graduated  according  to  the  mileage  of  lines  in  that 
State  compared  with  the  lines  in  all  the  States,  was  nothing  but  a  taxa- 
tion upon  the  property  of  the  company;  yet  it  was  in  terms  a  tax  upon 
its  capital  fetock,  aud  might  as  well  have  been  a  tax  upon  its  gross 
receipts.  By  the  present  decision  it  is  held  that  taxation  may  be  imposed 
upon  the  gross  receipts  of  the  company  for  the  exercise  of  its  franchise 
within  the  State,  if  graduated  according  to  the  number  of  miles  that  the 
road  runs  in  the  State.  Then  it  comes  to  this:  A  State  may  tax  a 
railroad  company  upon  its  gross  receipts  in  proportion  to  the  number 
of  miles  run  within  the  State,  as  a  tax  on  its  property ;  and  may  also  lay 
a  tax  upon  these  same  gross  receipts,  in  proportion  to  the  same  number 
of  miles,  for  the  privilege  of  exercising  its  franchise  in  the  State!  I  do 
not  know  what  else  it  may  not  tax:  the  gross  receipts  for.  If  the  inter- 
state commerce  of  the  country  is  not,  or  will  not  be,  handicapped  by 
this  course  of  decision,  I  do  not  understand  the  ordinary  principles 
which  govern  human  conduct." 


260  TAXATION    OF    INTERSTATE    CARRIERS.  §    233 

on  the  basis  of  the  mileage  within  the  State  to  the  total 
mileage,  has  been  distinctly  reaffirmed. ^ 

Thus  the  court  in  Erie  R.  R.  Co.  v.  Pennsylvania  re- 
affirmed the  case  of  Maine  v.  Grand  Trunk  Railway  and 
sustained  a  tax  of  Pennsylvania  which  it  was  claimed  was 
injproperly  levied  upon  tolls  received  by  a  New  York^rail- 
road  company  from  other  railroad  companies  for  the  use 
by  them  of  so  much  of  its  railroad  tracks  as  lay  in  the 
State  of  Pennsylvania.     It  said,  at  page  438 :  — 

"  The  tax  complained  of  is  not  laid  on  the  transportation 
of  the  subjects  of  interstate  commerce,  or  on  receipts  de- 
riTcd  therefrom,  or  on  the  occupation  or  business  of  carry- 
ing it  on.  It  is  a  tax  laid  upon  the  corporation  on  account 
of  its  property  in  a  railroad,  and  which  tax  is  measured  by  a 
reference  to  the  tolls  received.  The  State  has  not  sought  to 
interfere  with  the  agreement  between  the  contracting  parties 
in  the  matter  of  establishing  the  toUs.  Their  power  to  fix  the 
terms  upon  which  the  one  company  may  grant  to  the  other  the 
right  to  use  its  road  is  not  denied  or  in  anyway  controlled. 

"  It  is  argued  that  the  imposition  of  a  tax  on  tolls  might 
lead  to  increasing  them  in  an  effort  to  throw  their  burden 
on  the  caiTying  company.  Such  a  result  is  merely  con- 
jectural, and,  at  all  events,  too  remote  and  indirect  to  be 
an  interference  with  interstate  commerce.  The  interfer- 
ence with  the  commercial  power  must  be  direct,  and  not 
the  mere  incidental  effect  of  the  requirement  of  the  usual 
proportional  contribution  to  public  maintenance."  ^ 

1  New  York,  Lake  Erie  and  Western  R.  R.  Co.  v.  Pennsylvania,  158  U. 
S.  431 ;  Lehigh  Valley  R.  Co.  v.  Pennsylvania,  Ub  U.  S.  192.  In  the  latter 
case  the  tax  was  upon  the  gross  receipts,  but  it  was  held  that  the  railroad 
running  between  two  points  in  Pennsylvania  and  traversing  only  a  short 
distance  in  New  Jersey  was  not  engaged  in  interstate  commerce,  because 
the  incidental  passage  through  another  State  in  a  continuous  carriage 
from  one  point  in  a  State  to  another  point  in  the  same  State  is  not 
interstate  commerce. 

2  See  Cumberland  &  Penn.  R.  R.  Co.  v.  Maryland,  92  Md.  668,  and  52 
'  L.  R.  A.  764,  following  Maine  v.  Grand  Trunk  R.  R.  Co.,  and  carefully 

reviewing  the  decisions  of  the  Supreme  Court. 


§   235  TAXATION    OF    INTERSTATE    CARRIERS.  261 

§  234.  Immaterial  whether  corporation    is    domestic    or 
foreign. 

In  the  case  of  Maine  v.  Grand  Trunk  Railway  Company, 
the  defendant  was  a  foreign  corporation  organized  under 
the  laws  of  Canada,  but  its  railroad  in  Maine  had  been  con- 
structed by  another  corporation  under  a  Maine  charter,  and 
was  operated  by  defendant  under  lease.  The  decision  of  the 
court  however  was  not  based  upon  any  distinction  between 
the  status  of  a  domestic  and  that  of  a  foreign  corporation. 
It  said  that  the  granting  of  the  privilege  to  operate  in  the 
State  as  a  corporation,  whether  the  corporation  be  of 
domestic  or  foreign  origin,  rests  entirely  within  the  discre- 
tion of  the  State.  Obviously  this  expression  was  used  in 
the  sense,  not  that  the  State  can  prohibit  the  corporation 
engaged  in  interstate  commerce  from  operating  in  the  State, 
but  that,  whether  the  corporation  be  domestic  or  foreign,  the 
State  has  the  right  to  tax  the  corporate  franchise  upon  the 
basis  of  an  apportionment  to  the  receipts  of  the  business. 

The  rule  as  laid  down  therefore  in  Maine  v.  Grand  Trunk 
Railroad  Company,  supra,  §  231,  would  seem  to  be  equally 
applicable  to  foreign  and  domestic  corporations.  The 
difference  between  foreign  and  domestic  corporations  was 
discussed  in  Fargo  v.  Michigan,  supy^a,  §  229,  as  constitut- 
ing the  distinction  between  that  case,  which  involved  a 
foreign  corporation,  and  the  case  of  the  State  Tax  on  Gross 
Receipts,  in  which  the  corporation  was  domestic. ^ 

§  235.  Tax  not  upon   receipts    as    such,    but    excise    tax 
apportioned  to  receipts. 

The  decisions,  supra,  §  229,  holding  that  a  tax  cannot 
be  levied  upon  gross  receipts  as  such  have  not  been  over- 

1  In  Tide  Water  Pipe  Co.  v.  Assessors,  57  N.  J.  L.  516,  the  rule 
was  applied  in  sustaining  a  tax  upon  part  of  the  gross  receipts  of  a 
foreign  pipe  line  company  proportioned  to  the  mileage  in  the  State, 
the  tax  being  levied  as  a  franchise  tax  for  the  privilege  of  doing  busi- 
ness in  the  State. 


262        TAXATION  OF  INTERSTATE  CARRIERS.       §  236 

ruled  in  terms  and  it  would  seem  that,  though  the  dis- 
tinction seems  one  more  in  name  than  in  substance,  the  tax 
must  be  levied  as  an  excise  tax  apportioned  to  receipts  and 
not  directly  upon  receipts. 

The  question  does  not  seem  to  have  been  raised  or  con- 
sidered, in  relation  to  a  tax  upon  earnings,  whether  the 
railroad  company  would  be  allowed  to  show  in  any  particu- 
lar case  that  the  operation  of  the  mileage  rule  of  appor- 
tionment would  woi*k  injustice  by  enabling  the  State  to  tax 
an  undue  proportion  of  earnings.  Such  a  case  might  well 
occur  where  the  portion  of  a  companj^'s  line  in  one  State 
traversing  a  ver}'^  populous  district  would  be  far  more  pro- 
ductive of  earnino;s  than  the  same  mileasre  in  another  State. 
As  will  be  seen  hereafter,  this  consideration  has  been  rec- 
ognized by  the  courts  with  reference  to  the  mileage  rule  of 
apportionment  in  property  valuation. 

§  236.   State  tax  on  net  receipts. 

The  same  considerations  that  are  applicable  to  a  tax  upon 
gross  receipts  apply  to  one  levied  upon  net  receipts.  The 
latter,  being  the  proceeds  from  the  treasury  of  the  corpo- 
ration after  paying  all  expenses  of  management  and  operar 
tion,  are  clearly  distinguishable  from  transportation  receipts, 
even  if  gross  receipts  are  not,  and  this  seems  to  have  been 
conceded  in  the  cases  wherein  that  distinction  was  discussed. i 
Either  gross  receipts  or  net  receipts  may  therefore  in  the 
discretion  of  the  State  be  taken  as  the  basis  for  calculatino^ 
the  value  of  the  privilege  granted  the  corporation  under  its 
statutes,  when  the  State  seeks  to  determine  the  amount  of 
an  excise  tax  to  be  paid  therefor  by  the  corporation,  whether 
domestic  or  foreign.  This  privilege,  it  should  be  remem- 
bered, is  not  that    of  transacting   interstate  commerce  as 

^  See  opinion  in  State  Tax  oa  Riil way  Gross  Receipts,  SM2)ra,  §  226; 
also  Delaware  Railroad  Tax,  stipra,  §  227. 


§  237       TAXATION  OF  INTERSTATE  CARRIERS.         263 

such,  but  that  of  operating  as  a  corporation  under  the  laws 
of  the  State. 


§  237.  Valuation  of  property  by  capitalization  of  receipts. 

The  right  to  tax  receipts,  whether  gross  or  net,  must  be 
distinguished  from  using  the  receipts  or  income  of  the  cor- 
poration by  capitalizing  the  same  as  a  means  of  determin- 
ing the  valuation  of  the  property  tax.  It  is  the  same 
distinction  that  there  is  between  levying  a  tax  upon  the 
rental  and  upon  the  value  of  the  property  from  which  the 
rental  is  paid,  determining  the  valuation  of  the  pl'operty 
by  capitalizing  the  rental. i 

1  See  infra,  §  477. 


CHAPTEE    YIII. 

VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION. 

§  238.  Right  of  property  taxation  conceded. 

239.  Unit  rule. 

240.  Illinois  railroad  cases. 

241.  Supreme  Court  on  situs  of  railroad  property. 

242.  Supreme  Court  on  apportionment. 

243.  Application  of  unit  rule  to  intei'state  railroads. 

244.  Supreme    Court    on    mileage    apportionment  in  interstate  rail- 

roads. 

245.  Exceptional  circumstances  may  make  mileage  rule  inapplicable. 

246.  Rulings  on  testimony  not  reviewed  in  Supreme  Court  unless  bear- 

ing on  Federal  question. 

247.  Entire  property  may  be  considered  in  valuation  of  portion  v?ithin 

State. 

248.  Value  of  property  in  use  may  be  considered  in  valuation. 

249.  Unit  and  mileage  rule  as  applied  to  taxation  of  telegraph  com- 

panies. 

250.  Value  of  property  outside  State  to  be  considered  in  valuation 

under  mileage  apportionment. 

251.  Unit  rule  applied  to  express  companies. 

252.  Ohio  express  company  cases. 

253.  Special  circumstances  requiring  deduction  must  be  shown. 

254.  Rehearing  of  express  company  cases  denied. 

255.  Intangible  property  of  corporation  properly  considered  in  valua- 

tion. 

256.  Distinction  between  construction  of  statute  and  taxing  power  of 

State. 

257.  Property  must  be  shown  to  be  exempt  by  company. 

258.  Situs  of  intangible  property  of  interstate  company. 

259.  Kentucky  express  company  case. 

260.  Power   of   State   in  valuing '  interstate  properties  as  defined  by 

Supreme  Court. 

261.  Evidence  of  inapplicability  of  mileage  rule  admissible. 

262.  Stock  market  quotations  as  evidence  of  value. 

263.  Presumption  that  all  evidence  submitted  was  considered  in  valu- 

ation. 
(264) 


§   239  VALUATION    OF    INTEESTATE    PROPERTIES.  265 

§  238.   Right  of  property  taxation  conceded. 

The  difficulty  in  adjusting  a  tax  rate  on  earnings  so  as  to 
secure  equality  of  taxation  under  a  system  of  general  prop- 
erty taxation  has  led  to  a  general  adoption  of  the  s^^steni 
of  taxing  interstate  properties  by  an  ad  valorem  property 
valuation  .1  It  has  been  uniformlj^  declared  that  while  the 
States  cannot  interfere  by  taxation  or  otherwise  with  the 
conduct  of  interstate  commerce  or  tax  the  privilege  as  such 
of  conducting  such  commerce,  they  can  tax  the  property 
employed  therein  in  the  State  on  the  same  basis  that  they 
tax  other  property.  No  question  can  arise  therefore  as  to 
the  power  of  the  State  to  tax  the  tangible  property  in  its 
jurisdiction  of  a  railroad,  telegraph  or  other  company 
engaged  in  interstate  commerce.  Thus  the  roadbeds  and 
station  houses  of  a  railroad,  the  telegraph  poles,  wires 
and  offices  of  a  telegraph  company,  the  express  wao-ons 
and  delivery  offices  of  an  express  company  may  all  be  as- 
sessed like  other  property  of  the  same  class  and  subject  to 
the  same  taxation. 

The  difficulty  however  has  been  found  in  determining 
what  portion  of  the  intangible  property  of  such  interstate 
corporation  can  be  located  within  the  State  so  as  to  be 
subject  to  its  taxing  power. 

§  239.  Unit  rule. 

Before  the  question  was  presented  to  the  Supreme  Court 
in  relation  to  the  taxation  of  interstate  properties,  it  had 
arisen  in  some  of  the  States  in  reference  to  the  taxation  of 
such  properties  within  the  State.  There  was  established 
in  some  of  the  States,  with  reference  to  the  valuation  of 
intra-state  railroads,  the  so-called  unit  rule  or  rule  of 
entiretv,  to  wit,  the  valuation  of  a  railroad  in  a  State  for 


1  In  Michigan,  by  constitutional  amendment,  tiie  property  taxation  of 
railroads  was  adopted  recently  in  place  of  taxation  upon  gross  earnings. 


266  VALUATION    OF    INTERSTATE  PROPERTIES.  §   240 

taxation  as  an  entirety  and  the  apportionment  of  the  entire 
vakie  thus  ascertained  to  the  different  counties  or  municipal- 
ities in  the  State  traversed  by  the  raih-oad,  according  to  the 
proportionate  mileage  therein.  This  so-called  unit  rule  in 
fact  therefore  provided  for  the  valuation  of  such  properties 
by  the  central  power  of  the  entire  State,  in  place  of  local 
valuation  of  that  part  of  the  railroad  or  telegraph  system 
in  each  county  by  the  officials  thereof.  This  system  was 
established  about  the  same  time  in  both  Missouri  and  Illinois 
and  was  sustained  by  the  State  courts  of  both  States.  The 
system  of  unit  valuation,  particularly  the  mileage  appor- 
tionment, was  strongly  opposed  on  the  ground  that  it  dis- 
criminated against  communities  like  large  cities,  where 
terminal  systems  were  of  great  value  as  compared  with  the 
same  mileage  of  roadbed  in  a  thinly  populated  county.  But 
it  was  held  that  it  was  competent  for  the  legislature  to  adopt 
that  method  of  apportionment,  both  as  to  the  roadbed  and 
rolling  stock  of  a  railroad. i 

§  240.  Illinois  railroad  cases. 

The  Illinois  system  of  unit  valuation  and  mileage  appor- 
tionment within  the  State,  there  being  apparently  no  ques- 
tion as  to  the  valuation  of  interstate  properties,  was  con- 
sidered by  the  Supreme  Court  on  appeal  from  the  United 
States  Circuit  Court  in  what  are  known  as  the  State  Rail- 
road Tax  Cases,  in  1875.2  j^^  seems  that  when  the  opinion 
was  delivered,  the  points  raised  in  the  case  had  already  been 
decided  in  favor  of  the  State  by  the  Supreme  Court  of 
Illinois,  and  it  was  said  in  the  opinion  that,  as  the  whole 
matter  concerned  the  validity  of  State  law,  which  was  not 
seriously  questioned  on  the  ground  of  any  conflict  with  the 


1  See   State  ex  rel.  v.  Severance,  55  Mo.  378;  Porter  v.  Kailroad  Co., 
76  111.  561.     See  also  Kentucky  R.  R.  Case,  115.U.  S.  331. 

2  92  U.  S.  575. 


§   240  VALUATION    OF    INTERSTATE    PROPERTIES.  267 

Constitution  of  the  United  States,  the  decision  of  the  State 
court  was  to  be  accepted  as  the  rule  of  decision. ^  The 
court  however  discussed  the  system  enforced  by  the  State 
Board  of  Equalization,  charged  with  the  duty  of  valuing 
the  railroad  property,  and  the  judgment  of  the  Circuit 
Court  enjoining  the  collection  of  the  tax  was  reversed. 

It  seems  that,  according  to  the  Illinois  rule,  the  local 
tangible  property  of  the  companies,  other  than  their  road- 
bed and  rolling  stock,  was  assessed  in  the  county  or  city 
where  located, like  other  property,  by  the  local  authorities; 
while  the  railroad  track,  rolling  stock  and  other  property 
not  local  and  the  franchises  of  the  company  were  treated 
as  a  unit  for  taxation,  and  the  valuation  thereof,  when 
ascertained,  was  distributed  among  the  counties  through 
which  the  road  passed,  according  to  the  mileage  apportion- 
ment. The  board  adopted  rules  of ' valuation  as  follows, 
1.  c.  page,587  :  — 

"  First,  The  market  or  fair  cash  value  of  the  shares  of 
capital  stock,  and  the  market  or  fair  cash  value  of  the  debt 
(excluding  from  such  debt  the  indebtedness  for  current 
expenses),  shall  be  combined  or  added  together ;  and  the 
aggregate  amount  so  ascertained  shall  be  taken  and  held  to 
be  the  fair  cash  value  of  the  capital  stock,  including  the 
franchise,  respectively,  of  such  companies  and  associations. 

"  Second.  From  the  aggregate  amount  ascertained  as 
aforesaid,  there  shall  be  deducted  the  aggregate  amount  of 
the  equalized  or  assessed  valuation  of  all  the  tangible  prop- 
erty, respectively,  of  such  companies  and  associations  (such 
equalized  or  assessed  valuation  being  taken,  in  each  case, 
as  the  same  may  be  determined  by  the  equalization  or 
assessment  of  property  by  this  board)  ;  and  the  amount  re- 
maining in  each  case,  if  any,  shall  be  taken  and  held  to  be 
the  amount  and  fair  cash  value  of  the  capital  stock,  includ- 

'  92  U.  S.  617. 


268  VALUATION    OF    INTEESTATE    rEOPERTIES.  §   240 

ing  the  franchise,  which  this  board  is  required  by  law  to 
assess,  respectively,  against  companies  and  'associations 
now  or  hereafter  created  under  the  laws  of  this  State." 

The  court  said,  opinion  by  Justice  Miller,  as  to  this 
method  of  valuation,  that  the  value  of  railroad  bonds  in  the 
market  is  one  of  the  truest  criteria,  as  far  as  it  goes,  of 
the  value  of  the  road  as  a  security  for  the  payment  of  those 
bonds.     Justice  Miller  proceeded,  1.  c.  p.  605  ;  — 

"  It  is  therefore  obvious,  that,  when  you  have  ascertained 
the  current  cash  value  of  the  v.hole  funded  debt,  and  the 
current  cash  value  of  the  entire  number  of  shares,  you  have, 
by  the  action  of  those  who  above  all  others  can  best  esti- 
mate it,  ascertained  the  true  value  of  the  road,  all  its 
property,  its  capital  stock,  and  its  franchises ;  for  these 
are  all  represented  by  the  value  of  its  bonded  debt  and  of 
the  shares  of  its  capital  stock."  ^ 

He  added  that  this  would  be  perhaps  the  fairest  basis  of 
taxation  for  the  State  at  large,  if  all  railroads  were  solvent 
and  paid  the  interest  promptly  .on  their  funded  debt,  but  that 
this  was  not  the  case.  The  system  adopted  by  the  statute 
of  Illinois  and  the  rule  of  the  board  preserved  the  principle 
of  taxing  all  the  tangible  property  at  its  value,  and  then 
taxing  the  capital  stock  and  franchise  at  their  value,  if 
there  was  any,  after  deducting  the  value  of  the  tangible 
property. 


1  But  held  in  Pullman's  Palace  Car  Co.  v.  Transportation  Co.,  171 
U.  S.  138,  that  the  market  value  of  stock  of  a  manufacturing  company  is 
not  a  proper  measure  of  the  value  of  the  property  in  accounting  for  the 
value  thereof,  as  other  considerations,  speculative  and  otherwise,  not 
affecting  the  value  of  the  property,  may  enter  into  the  market  value  of 
the  shares.  See  also  Railroad  and  Telephone  Companies  v.  State  Board 
of  Equalizers  of  Tennessee,  85  Fed.  302,  where  it  was  said  that  notwith- 
standing anything  that  may  be  said  in  the  judicial  decisions  and  legisla- 
tive enactments,  "  no  more  uncertain  or  delusive  element  in  the  attempt 
to  fix  values  was  ever  resorted  to  than  this  stock  and  bond  basis." 


§  242  VALUATION    OF    INTERSTATE    PROPERTIES.  269 

§  241.  Supreme  Court  on  situs  of  railroad  property. 

In  answer  to  the  objection  that  the  personal  property  had 
a  situs  at  the  principal  place  of  business  of  the  corporation 
and  should  be  taxed  there,  the  court  said,  p.  607 : — 

"  This  objection  is  based  upon  the  general  rule  of  law 
that  personal  property,  as  to  its  situs,  follows  the  domicile 
of  its  owner.  It  may  be  doubted  very  reasonably  whether 
such  a  rule  can  be  applied  to  a  railroad  corporation  as 
between  the  different  localities  embraced  by  its  line  of  road. 
But,  after  all,  the  rule  is  merely  the  law  of  the  State  which 
recognizes  it ;  and  when  it  is  called  into  operation  as  to  prop- 
erty located  in  one  State,  and  owned  by  a  resident  of  an- 
other, it  is  a  rule  of  comity  in  the  former  State  rather  than 
an  absolute  principle  in  all  cases.  Green  v.  Van  Buskirk, 
6  Wall.  312.  ■  Like  all  other  laws  of  a  State,  it  is,  there- 
fore, subject  to  legislative  repeal,  modification,  or  limita- 
tion; and  when  the  legislature  of  Illinois  declared  that  it 
should  not  prevail  in  assessing  personal  property  of  railroad 
companies  for  taxation,  it  simply  exercised  an  ordinary 
function  of  legislation." 

Objection  was  made  to  the  assessment  of  the  value  as  a 
unit  and  the  distribution  according  to  mileage,  and  it  was 
said  by  the  court :  — 

§  242.  Supreme  Court  on  apportionment. 

"This,  it  is  said,  works  injustice  both  to  the  counties 
and  to  the  companies.  To  the  counties  and  cities,  by  de- 
priving them  of  the  benefit  of  this  value  as  a  basis  of  local 
taxation;  to  the  company,  b}''  subjecting  its  track  and  fran- 
chises, on  the  basis  of  this  general  value,  to  the  taxation  of 
the  counties  and  towns,  varying,  as  they  do,  in  rate,  with- 
out the  benefit  of  the  rule  of  assessment  which  prevails  in 
those  counties  in  the  valuation  of  other  and  similar  prop- 
erty.    But,  as  we  have    already   said,  a  railroad   must  be 


270  VALUATION    OF    INTERSTATE    PROPERTIES.  §    243 

regarded  for  man}^,  indeed  for  most  purposes,  as  a  unit. 
The  track  of  the  road  is  but  one  track  from  one  end  of  it 
to  the  other,  and,  except  in  its  use  as  one  track,  is  of  little 
value.  In  this  track  as  a  whole  each  county  through 
which  it  passes  has  an  interest  much  more  important 
than  it  has  in  the  limited  part  of  it  lying  within  its 
boundary.  Destroy  by  any  means  a  few  miles  of  this 
track  within  an  interior  county,  so  as  to  cut  off  the  con- 
nection between  the  two  parts  thus  separated,  and,  if 
it  could  not  be  repaired  or  replaced,  its  effect  upon  the 
value  of  the  remainder  of  the  road  is  out  of  all  propor- 
tion to  the  mere  local  value  of  the  part  of  it  destroyed. 
A  similar  effect  on  the  value  of  the  interior  of  the  road 
would  follow  the  destruction  of  that  end  of  the  road  lying  in 
Chicago,  or  some  other  place  where  its  largest  traffic  cen- 
ters. It  may  well  be  doubted  whether  any  better  mode  of 
determining  the  value  of  that  portion  of  the  track  within 
any  one  county  has  been  devised  than  to  ascertain  the  value 
of  the  whole  road,  and  apportion  the  value  within  the 
county  by  its  relative  length  to  the  whole." 

§  243.  Application   of  unit   rule   to  interstate  railroads. 

About  ten  years  later,  in  the  Kentucky  Eailroad  Tax 
Cases,!  the  Kentucky  statute  for  the  valuation  of  railroad 
property  by  a  State  board  under  the  mileage  rule  of  appor- 
tionment of  interstate  property  was  sustained  as  not  vio- 
lating the  Fourteenth  Amendment.  But  apparently  the 
question  was  not  raised,  whether  the  State's  valuation  of 
property  outside  of  its  jurisdiction  constituted  interference 
with  interstate  commerce. 

The  application  of  these  principles  to  the  valuation  by  a 
State  board  of  interstate  railroads  was  presented  to  the 
court  nearly  twenty  years  after  the  decision  of  the  State 

1  115  U.  S.  321. 


§   244  VALUATION    OF    INTERSTATE  PROPERTIES.  271 

Kailroad  Tax  Cases  iu  the  Indiana  Kailroad  Cases, i 
where  the  subject  was  very  fully  considered.  The  Indiana 
statute  of  1891  provided  for  the  assessment  of  railroad 
property  by  a  State  board,  which  should  act  upon  the 
reports  of  the  railroad  companies  showing  the  length  of 
track  in  each  county,  the  total  amount  of  roUing  stock,  the 
capital  stock,  market  value,  and  so  on. 

The  court  said  that  it  was  concluded  by  the  decision  of 
the  Supreme  Court  of  Indiana,  that  the  method  of  assess- 
ment was  authorized  by  the  constitution  of  that  State, 
and  the  validity  of  the  statute  under  the  Federal  Constitu- 
tion was  really  established  by  its  own  decisions  in  the  State 
Eailroad  Tax  Cases  and  Kentucky  Eailroad  Tax  Cases, 
supra.  It  was  strongly  contended  that  the  statute  permit- 
ted and  required  the  assessment  and  valuation  of  property 
outside  of  the  State,  and  this  argument  was  based  upon  the 
requirement  that  a  statement  of  the  amount  of  the  capital 
stock  and  the  indebtedness  of  the  railroad  should  be  re- 
turned to  the  State  Auditor.  But  the  court  held  that  the 
board  had  a  right  to  this  information  for  determining  the 
value  of  the  property  within  the  State,  saying,  page  430  :  — 

§  244.  Supreme  Court  on  mileage  apportionment  in  in- 
terstate railroads. 

"  When  a  road  runs  through  two  States,  it  is,  as  seen, 
helpful  in  determining  the  value  of  that  part  within  one 
State  to  know  the  value  of  the  road  as  a  whole.  It  is  not 
stated  in  this  statute  that  when  the  value  of  a  road  running 
in  two  States  is  ascertained  the  value  of  that  in  the  State 
of  Indiana  shall  be  determined  absolutely  by  dividing  the 
gross  value  upon  a  mileage  basis,  but  only  that  the  total 
amount  of  stock  and  indebtedness  shall  be  presented  for 

1  Pittsburg,  etc.,  R.  R.  Co.  v.  Backus,  154  U.  S.  421 ;  and  C.  C.  C.  & 
St.  Louis  R.  R.  Co.  u.  Backus,  164  U.  S.  439. 


272  VALUATION    Oi^'  INTERSTATE    PROPERTIES.  §   245 

consideration  by  the  State  board.  Nevertheless,  it  is  ordi- 
narily true  that  when  d  railroad  consists  of  a  single  contin- 
uous line,  the  value  of  one  part  is  fairly  estimated  by 
taking  that  part  of  the  value  of  the  entire  road  which  is 
measured  by  the  proportion  of  the  length  of  the  particular 
part  to  that  of  the  whole  road.  This  mode  of  division  has 
been  recognized  by  this  court  several  times  as  eminently 
fair." 

§  245.  Exceptional  circumstances  may  make  mileage  rule 
inapplicable. 

The  same  difficulty  which  was  suggested  in  relation  to 
the  mileage  rule  of  apportionment  within  a  State  applies 
in  a  greater  degree  to  that  rule  as  applied  to  an  interstate 
road.  It  was  admitted  by  the  Supreme  Court  in  these 
Indiana  cases  that  exceptional  circumstances  may  exist,  and 
it  is  rio-lit  that  an  assessins;  board  should  consider  them ; 
but  it  will  be  presumed  that,  if  evidence  of  such  circum- 
stances was  offered,  it  was  taken  into  account,  and  that  the 
board  gave  due  weight  to  it  before  finally  fixing  the 
assessed  valuation  of  the  property  within  the  State.-  Thus 
it  was  said  in  one  of  the  cases,  at  page  431 :  — 

"  It  is  true,  there  may  be  exceptional  cases,  and  the 
testimony  offered  on  the  trial  of  this  case  in  the  Circuit 
Court  tends  to  show  that  the  plaintiff's  road  is  one  of  such 
exceptional  cases,  as  for  instance,  where  the  terminal  facil- 
ities in  some  large  city  are  of  enormous  value,  and  so  give 
to  a  mile  or  two  in  such  city  a  value  out  of  all  proportion 
to  any  similar  distance  elsewhere  along  the  line  of  the  road, 
or  where  in  certain  localities  the  company  is  engaged  in  a 
particular  kind  of  business  requiring  for  sole  use  in  such 
localities  an  extra  amount  of  rolling  stock.  If  testimony 
to  this  effect  was  presented  by  the  company  to  the  State 
boarjd,  it  must  be  assumed,  in  the  absence  of  anything  to 
the  contrary  that  such  board,    in  making  the  assessment  of 


§  246  VALUATION  OF  INTERSTATE  PROPERTIES.  273 

track  and  rolling  stock  within  the  State,  took  into  account 
the  peculiar  and  large  value  of  such  facilities  and  such  extra 
rolling  stock.  But  whether  in  any  particular  case  such 
matters  are  taken  into  consideration  by  the  assessing  board 
does  not  make  against  the  validity  of  the  law,  because  it 
does  not  require  that  the  valuation  of  the  property  within 
the  State  shall  be  absolutely  determined  upon  a  mileage 
basis, 

"Our  conclusion,  therefore,  is  that  this  act  is  not 
obnoxious  to  any  of  the  constitutional  objections  made 
to  it." 

In  this  case  the  court  sustained  the  assessment,  although 
admitting  that  ' '  a  shadow  had  been  cast  upon  the  action 
of  the  board,"  in  that  the  valuation  had  been  increased 
from  $8,538,053.00  in  1890  to  $22,666,470.00  in  1891. 

§  246.  Rulings  on   testimony   not   reviewed  in  Supreme 
Court  unless  bearing-  on  Federal  question. 

In  another  one  of  the  Indiana  Railroad  Tax  Cases  a  special 
effort  was  made  to  show  that  the  State  board  had  included 
in  its  assessment  the  value  of  property  outside  of  the  State, 
and  that  the  valuation  placed  upon  the  property  in  the 
State  was  largely  upon  interstate  business  done  by  the 
plaintiff,  thus,  it  was  claimed,  placing  a  direct  burden  upon 
interstate  commerce.  It  appeared  that  the  trial  court  had 
ruled  out  the  testimony  offered  as  to  the  elements  the  mem- 
bers of  the  board  considered  in  making  their  valuation, 
but  there  was  evidence  that  no  franchise  belono-ino-  to  the 
plaintiff  was  estimated  in  making  the  assessment.  The 
Supreme  Court,  Justice  Brewer  delivering  the  opinion, 
said,  at  page  443,  that  it  is  not  within  the  province  of  the 
court  to  review  any  question  as  to  the  admission  or  rejec- 
tion of  testimony  which  does  not  bear  directly  upon  some 
matter  of  a  Federal  nature,  and  that,  under  the  record, 
the  inquiry  was  narrowed  to  these  two  matters : 

18 


274  VALUATION  OF  INTERSTATE  PROPERTIES.  §   247 

§  247.  Entire  property  may  toe  considered  in  valuation  of 
portion  within  State. 

"  First,  if  an  assessing  board,  seeking  to  assess  for 
purj)oses  of  taxation  a  part  of  a  road  within  a  State,  the 
other  part  of  which  is  in  an  adjoining  State,  ascertains 
the  value  of  the  whole  line  as  a  single  property  and  then  de- 
termines the  value  of  that  within  the  State,  upon  the  mileao^e 
basis,  is  that  a  valuation  of  property  outside  of  the  State, 
and  must  the  assessing  board,  in  order  to  keep  within  the 
limits  of  State  jurisdiction,  treat  the  part  of  the  road 
within  the  State  as  an  independent  line,  disconnected  from 
the  part  without,  and  place  upon  that  property  only  the 
value  which  can  be  given  to  it,  if  operated  separately  from 
the  balance  of  the  road?  Second.  Where  an  assessing 
board  is  charged  with  the  duty  of  valuing  a  certain  num- 
ber of  miles  of  railroad  within  a  State  forming  part  of  a 
line  of  road  running  into  another  State,  and  assesses  those 
miles  of  road  at  their  actual  cash  value  determined  on  a 
mileage  basis,  is  this  placing  a  burden  upon  interstate  com- 
merce, beyond  the  power  of  the  State,  simply  because  the 
value  of  that  railroad  as  a  whole  is  created  partlj^  —  and 
perhaps  largely  —  by  the  interstate  commerce  which  it  is 
doing?" 

**  With  regard  to  the  first  question,  it  is  assumed  that  no 
special  circumstances  exist  to  distinguish  between  the  con- 
ditions in  the  two  States,  such  as  terminal  facilities  of 
enormous  value  in  one  and  not  in  the  other.  With  this 
assumption  the  first  question  must  be  answered  in  the  neg- 
ative. The  true  value  of  a  line  of  railroad  is  something 
more  than  an  aggregation  of  the  values  of  separate  parts 
of  it,  operated  separately.  It  is  the  aggregate  of  those 
values  plus  that  arising  from  a  connected  operation  of  the 
whole,  and  each  part  of  the  road  contributes  not  merely 
the  value  arising  from  its   independent    operation,  but  its 


§  248      VALUATION  OF  INTERSTATE  PROPERTI.ES.       275 

mileage  proportion  of  that  flowing  from  a  continuous  and 
connected  operation  of  the  whole." 

The  court  illu?strated  this  increase  of  value  from  combi- 
nation by  showing  the  effect  of  the  New  York  Central 
Consolidation,  where  it  was  observed  that  the  value  of  the 
property  immediately  upon  the  consolidation  was  recog- 
nized in  the  market  as  largely  in  excess  of  the  value  of  the 
separate  properties.  It  was  unnecessary  to  inquire  into 
the  cause  of  this  increase  in  value.  It  was  enough  to 
notice  the  fact.  The  State  was  entitled  to  tax  its  propor- 
tionate share  of  the  value  flowing  from  the  operation  of  the 
entire  mileage  as  a  single  continuous  road.  The  opinion 
continued:  — 

"The  question  is,  how  can  equity  be  secured  between 
the  States,  and  to  that  a  division  of  the  value  of  the  entire 
property  upon  the  mileage  basis  is  the  legitimate  answer. 
Taking  a  mileage  share  of  that  in  Indiana  is  not  taxing 
property  outside  of  the  State." 

"  The  second  question  must  also  be  answered  in  the  neg- 
ative. It  has  been  again  and  again  said  by  this  court  that 
while  no  State  could  impose  any  tax  or  burden  upon  the 
privilege  of  doing  the  business  of  interstate  commerce,  yet 
it  had  the  unquestioned  right  to  place  a  property  tax  on 
the  instrumentalities  engaged  in  such  commerce," 

§  248.   Value  of   property   in  use  may  be  considered  in 
valuation. 

As  to  the  basis  of  property  taxation,  it  was  said,  page 
445 :  — 

"  The  rule  of  property  taxation  is  that  the  value  of  the 
property  is  the  basis  of  taxation.  It  does  not  mean  a  tax 
upon  the  earnings  which  the  property  makes,  nor  for  the 
privilege  of  using  the  property,  but  rests  solely  upon  the 
value.  But  the  value  of  property  results  from  the  use  to 
which  it  is  put  and  varies  with  the  profitableness  of  that 


276  YALUATIOX  OF  INTERSTATE  PROPERTIES.  §   249 

use,  present  and  prospectiye,  actual  and  anticipated. 
There  is  no  pecuniary  value  outside  of  that  which  results 
from  such  use.  The  amount  and  profitable  character  of 
such  use  determines  the  value,  and  if  property  is  taxed  at 
its  actual  cash  value,  it  is  taxed  upon  something  which  is 
created  by  the  uses  to  which  it  is  put.  In  the  nature  of 
thino-s  it  is  practically  impossible  —  at  least  in  respect  to 
railroad  property  —  to  divide  its  value,  and  determine  how 
much  is  caused  by  one  use  to  which  it  is  put  and  how 
much  by  another.  Take  the  case  before  us ;  it  is  impos- 
sible to  disintegi'ate  the  value  of  that  portion  of  the  road 
within  Indiana  and  determine  how  much  of  that  value 
springs  from  its  use  in  doing  interstate  business,  and  how 
much  from  its  use  in  doing  business  wholly  within  the 
State.  An  attempt  to  do  so  would  be  entering  upon  a 
mere  field  of  uncertainty  and  speculation.  And  because  of 
this  fact  it  is  something  which  an  assessing  board  is  not 
required  to  attempt." 

The  court  added :  — 

**  It  is  enough  for  the  State  that  it  finds  within  its  bor- 
ders  property  wjiich  is  of  a  certain  value.  What  has  caused 
that  value  is  immaterial.  It  is  protected  b}^  State  laws,  and 
the  rule  of  all  property  taxation  is  the  rule  of  value,  and 
by  that  rule  property  engaged  in  interstate  commerce  is  con- 
trolled the  same  as  property  engaged  in  commerce  within 
the  State."! 

§  249.  Unit   and   mileage   rule  as  applied  to  taxation  of 
telegraph  companies. 

In  two  successive  cases  from  Massachusetts  and  one  from 


1  Justice  Harlan,  with  whom  concurred  Justice  Brown,  dissented  in 
these  cases,  saying  that  the  statute  as  construed  by  the  Supreme  Court 
of  the  State  imposed  illegal  burdens  upon  interstate  commerce,  under  the 
guise  of  valuation  for  purposes  of  taxation  of  property  within  the  State. 


§   250  VALUATION  OF  INTERSTATE  PROPERTIES.  277 

Indkna,!  tlie  Supreme  Court  sustained  the  taxation  of  the 
Western  Union  Telegraph  Company  under  the  mileage  rule 
of  apportionment,  that  is,  by  taking  as  a  basis  of  assess- 
ment such  portion  of  the  total  capital  stock  of  the  company 
as  equaled  the  ratio  of  the  company's  mileage  within  the 
State  to  its  total  mileage.  It  was  strongly  contended  that 
telegraph  companies  are  government  agencies  and  so  not 
taxable  by  State  authority,  and  that  therefore  such  portion 
of  the  Western  Union  lines  as  was  located  on  roads  declared 
post  roads  by  Congress  was  exempt.  But  the  court  said 
in  the  case  first  cited,  page  549,  that,  if  this  principle  were 
sound,  every  railroad  in  the  country  would  be  exempt  from 
taxation  because  they  had  all  been  declared  to  be  post  roads, 
and  the  same  reasoning  would  apply  to  every  bridge 
and  navigable  stream  throughout  the  land.  It  was  held 
therefore  that  the  Act  of  Congress,  supra,  §  208,  granted 
to  the  telegraph  company  no  right  of  exemption  from  tax- 
ation of  its  property  located  in  the  State,  and  that  this 
method  of  mileage  apportionment  was  a  reasonable  and 
just  method  of  determining  the  value  of  its  line  within  the 
State. 

§  250.  Value  of  property  outside    State  to  be  considered 
in  valuation  under  mileage  apportionment. 

It  was  strongly  contended  in  the  case  last  cited  from 
Massachusetts  and  also  in  the  case  from  Indiana,  that  the 

The  board  had  no  authority  to  impart  to  the  railroad  track  and  rolling 
stock  within  the  State  any  part  of  the  value  of  the  company's  various 
interests  and  property  veithout  the  State. 

1  W.  U.  Telegraph  Co.  v.  Massachusetts,  125  U.  S.  530;  Massachusetts 
V.  W.  U.  Tel.  Co.,  141  U.  S.  40;  W.  U.  Telegraph  Co.  v.  Taggart,  1G3 
U.  S.  1.  The  principles  of  these  cases  were  followed  and  applied  in 
State  ex  rel.  v.  Western  Union  Tel.  Co.,  165  Mo.  502,  where  the  propor- 
tion of  the  franchise  exercised  in  the  State  was  held  taxable  by  adding 
the  proportional  part  of  the  value  of  the  franchise  to  the  value  of  the 
property  located  in  the  State. 


278      VALUATION  OF  INTERSTATE  PROPERTIES.      §  250 

company  was  entitled  to  a  deduction  from  the  valuation  as 
fixed,  on  account  of  property  located  in  other  States  and 
taxable  under  the  laws  of  such  States  and  also  on  account 
of  property  exempt  from  taxation. 

In  W.  U.Tel.  Co.  v.  Taggart,  the  court,  referring  to  the 
prior  decision  in  regard  to  the  same  company,  said  at  page 
18:  — 

"  Those  decisions  clearly  establish  that  a  statute  of  a 
State,  requiring  a  telegraph  company  to  pay  a  tax  upon  its 
property  within  the  State,  valued  at  such  a  proportion  of 
the  whole  value  of  its  capital  stock  as  the  length  of  its 
lines  Avithin  the  State  bears  to  the  length  of  all  its  lines 
everywhere,  deducting  a  sum  equal  to  the  value  of  its  real 
estate  and  machinery  subject  to  local  taxation  within  the 
State,  is  constitutional  and  valid,  nothwithstanding  that 
nothino;  is  in  terms  directed  to  be  deducted  from  the  valua- 
tion,  either  for  the  value  of  its  franchises  from  the  United 
States,  or  for  the  value  of  its  real  estate  and  machinery 
situated  and  taxed  in  other  States ;  unless  there  is  some- 
thing more  showing  that  the  system  of  taxation  adopted  is 
oppressive  and  unconstitutional." 

The  law  of  Indiana  provided  that  the  company  should 
return  a  statement  of  its  whole  capital  stock,  the  par  value 
of  its  shares  and  their  market  value,  or  if  they  had  no 
market  value,  their  actual  value,  its  real  estate  and  other 
property  in  the  State  subject  to  local  taxation,  its  real 
estate  outside  of  the  State  and  not  directly  used  in  the 
conduct  of  its  business  and  the  sums  at  which  such  real 
estate  was  assessed  for  local  taxation,  the  mortgages 
upon  thq  whole  or  any  part  of  its  line,  and  the  whole 
leuoth  of  its  line  and  the  length  within  the  State  and 
each  county  and  township  of  the  State.  From  these 
statements  and  such  other  information  as  it  might  have 
or  obtain,  the  board  of  tax  commissioners  was  directed  to 
value  and  assess  the  property  by  ascertaining  the  true  cash 


§  250     VALUATION  OF  INTERSTATE  PROPERTIES.       279 

value  of  its  entire  property,  for  that  purpose  taking  the 
aggregate  value  of  its  shares,  if  they  had  a  market  value, 
or,  if  they  had  none,  the  actual  value  thereof.  Then,  for 
the  purpose  of  ascertaining  the  true  cash  value  of  the 
property  within  the  State,  after  deducting  property  taxable 
locally,  the  proportion  of  the  whole  aggregate  value  of  the 
property  was  computed  on  a  mileage  basis.  This  act  had 
been  construed  by  the  Supreme  Court  of  the  State  ^  as 
simply  providing  for  the  valuation  of  the  property  in  the 
State,  and  that,  if  it  was  shown  that  for  any  reason  the 
larger  proportional  values  existed  outside  the  State,  then 
deductions  should  be  made  therefor. 

Demurrer  was  sustained  to  the  bill  of  complaint  of  the 
telegraph  company,  and  this  ruling  was  affirmed  b}^  the  Su- 
preme Court  of  the  State,  and,  on  writ  of  error,  by  the 
Supreme  Court  of  the  United  States.  The  latter  court  said 
that  it  would  be  presumed,  in  the  absence  of  evidence  to 
the  contrary,  that  the  State  board  had  deducted  from  the 
total  valuation  of  all  the  interstate  property  such  value,  if 
any,  of  extra-state  property  as  would  leave  the  remaining 
property  within  and  without  the  State,  as  near  as  might  be 
of  equal  proportional  value.  It  was  claimed  in  the  bill  of 
complaint  that  the  price  obtained  for  a  few  of  the  shares 
in  the  New  York  Stock  Exchange  did  not  fairly  represent 
the  actual  value  of  plaintiff's  property;  and  that  any  price 
at  which  any  shares  might  be  sold  by  holders  thereof, 
whether  calculated  upon  any  market  value  or  upon  actual 
value,  included  a  consideration  of  the  plaintiff's  franchises, 
contracts,  past  and  probable  future  earnings,  the  skill  and 
enterprise  of  its  managers  and  real  estate  of  great  value  in 
Indiana  or  elsewhere,  all  of  which  were  blended  so  as  to 
render  it  impossible  to  separate  and  disintegrate  the  portions 
of  value  applicable  to  each  and    any    of  'said   elements    of 

»  141  lad.  281. 


280  VALUATION    OF   INTERSTATE   PROPERTIES.  §   251 

value  in  its  shares.  The  court  said,  at  page  30,  that  this 
was  iiardly  more  tliau  an  argument  to  show  the  difficulty 
of  ascertaining  the  actual  cash  value  of  plaintiff's  property 
in  the  State  of  Indiana.  "  It  certainly  has  no  tendency  to 
show  that  the  tax  connnissioners  did  not,  as  they  were  re- 
(juirod  to  do  by  tlie  statute  as  since  construed  b}^  the  Su- 
piHMiui  Court  of  the  State,  assess  the  plaintiff's  property  in 
Indiana  at  its  true  (;asli  vahie  according  to  their  best  knowl- 
edge and  judgment,  and  after  making  all  [)roper  deductions, 
on  account  of  larger  })roportional  values  of  its  property  and 
business  outside  the  State,  or  for  any  other  reason."* 

§  2.')1.  Unit  rule  applied  to  express  companies. 

"^riie  most  signal  and  closely  contested  applications  of  the 
unit  rul(^  with  milciagc  apportionment  were  in  the  taxation 
of  11 1(^  Adams  Express  Company,  under  the  so-called 
Nichols  Law  of  Ohio  and  under  a  similar  law  of  Kentucky. 

The  Nichols  Law  required  every  telegraph,  telephone  and 
express  company  doing  business  in  Ohio  to  file  a  return  to 
tlu^  Stale  boai'd,  setting  forth,  among  other  things,  the 
numb(>r  of  shares  of  its  capital  stock,  the  par  and  market 
value  thereof,  aiul,  when  the  shares  had  no  market  value, 
their  actual  value  at  the  date  of  the  return;  also  a  state- 
ment in  detail  of  the  entire  real  and  personal  property  of 
the  company,  where  it  was  located  and  its  value.  Ex- 
press companies  wore  also  required  to  include  a  statement 
of  their  entire  gross  receipts  for  the  year,  from  whatever 
source  derived,  of  business  wherever  done  and  of  that  done 
in  the  State  of  Ohio,  giving  the  receipts  of  each  office  in 
the  State,  and  the  whole  length  of  rail  and  water  routes 
over  which  the  company  did  business  within  and  without 
the  State.  The  board  M'as  required  to  meet  in  June  and 
assess  the  value  of  the  ])roperty  of  the  companies  in  Ohio 
under  the  following  rule:  ^  — 

1  Adams  Express  Co.  v.  Ohio,  1(!5  U.  S.  194. 


§   252  VALUATION  OF  IXTERSTATE  PROPEETIES.  281 

<'In  determining  the  value  of  the  property  of  said  com- 
panies in  this  State,  to  be  taxed  within  the  State  and 
assessed  as  herein  provided,  said  board  shall  be  guided  by 
the  value  of  said  property  as  determined  by  the  value  of 
the  entire  capital  stock  of  said  companies,  and  such  other 
evidence  and  rules  as  will  enable  said  board  to  arrive  at  the 
true  value  in  money  of  the  entire  property  of  said  com- 
panies within  the  State  of  Ohio,  in  the  proportion  which 
the  same  bears  to  the  entire  property  of  said  companies,  as 
determined  by  the  value  of  the  capital  stock  thereof,  -and 
the  other  evidence  and  rules  as  aforesaid." 

§  252.  Ohio  express  company  cases. 

In  the  case  of  express  companies,  the  apportionment 
was  to  be  made  among  the  several  counties  in  which  they 
did  business,  in  the  proportion  that  the  gross  receipts  in 
each  county  bore  to  the  gross  receipts  in  the  State.  The 
amount  thus  apportioned  was  to  be  certified  to  the  county 
auditor  and  there  taxed  at  the  same  rate  as  other  personal 
property.  Provision  was  made  for  hearing  and  for  the  cor- 
rection of  erroneous  and  excessive  valuations.  Assessments 
were  made  upon  the  property  of  the  express  companies  in 
Ohio  as  follows  :  — 

Adams  Express  Company $533,095.80. 

American  Express  Company 499,373.60. 

United  States  Express  Company.  .  .  .    488,264.70. 

Bills  were  filed  to  enjoin  the  collection  of  these  taxes, 
on  the  ground  that  the  companies  had  no  property  in  the 
State  of  Ohio  except  certain  horses,  wagons,  harness  and 
the  like,  and  that  the  value  of  their  capital  stock  or  shares 
and  of  express  companies  generally  was  determined,  not  so 
much  by  the  value  of  their  property  and  appliances,  as  by 
the  skill,  diligence,  fidelity  and  success  with  which  they 
conducted  their  business.     They  claimed  that  they  owned 


282  VALUATION  OF  INTERSTATE  PROPERTIES.  §   252 

property  of  great  value  which  was  not  situated  in  the  State 
of  Ohio  and  that  their  business  connections,  reputation  and 
good- will  had  entered  largely  into  the  value  of  their  capi- 
tal stock  and  shares ;  that  the  market  price  was  speculative 
and  variable,  dependent  upon  financial  conditions  not  con- 
nected with  the  business  of  the  company  or  its  property ; 
and  that  the  method  of  taxation  was  violative  of  the  Consti- 
tution, was  an  illegal  burden  upon  interstate  commerce  and 
was  a  denial  of  the  equal  protection  of  the  laws. 

The  express  companies  returned  the  value  of  their  prop- 
erty in  and  out  of  the  State,  the  whole  gross  receipts  in  the 
State  and  the  length  of  their  lines  in  and  out  of  the  State, 
but  made  no  return  of  their  entire  gross  receipts  of  busi- 
ness wherever  done,  nor  of  the  terms  of  their  contracts  or 
arrangements  for  transportation.  The  court  held,  oiDinion 
by  Chief  Justice  Fuller,  that  the  act  was  not  open  to  the 
objections  claimed,  under  the  Federal  Constitution,  saying 
at  page  220 :  — 

*'  As  to  railroad,  telegraph  and  sleeping  car  companies 
engaged  in  interstate  commerce,  it  has  often  been  held  by 
this  court  that  their  property,  in  the  several  States  through 
which  their  lines  of  business  extended,  might  be  valued  as 
a  unit  for  the  purposes  of  taxation,  taking  into  considera- 
tion the  uses  to  which  it  was  put  and  all  the  elements  mak- 
ing up  aggregate  value,  and  that  a  proportion  of  the  whole 
fairly  and  properly  ascertained  might  be  taxed  by  the  par- 
ticular State  without  violating  any  Federal  restriction." 

The  court  conceded  that  there  was  a  difference  between 
the  property  of  railroad  and  telegraph  companies  and  that 
of  express  companies,  but  maintained  that  there  was  the 
same  unity  in  the  use  of  the  entire  property  for  a  specific 
purpose,  and  the  same  elements  of  value  arising  from  such 
use.     It  said,  at  pp.  221  and  222 :  — 

"  No  more  reason  is  perceived  for  limiting  the  valuation 
of  the  property  of  express    companies   to  horses,  wagons 


§   253  VALUATION  OF  INTERSTATE  PROPERTIES.  283 

and  furniture,  than  that  of  railroad,  telegraph  and  sleep- 
ing car  companies,  to  roadbed,  rails  and  ties ;  poles  and 
wires;  or  cars.  The  unit  is  a  unit  of  use  and  manage- 
ment, and  the  horses,  wagons,  safes,  pouches  and  furni- 
ture ;  the  contracts  for  transportation  facilities ;  the  capi- 
tal necessary  to  cany  on  the  business,  whether  represented 
in  tangible  or  intangible  property,  in  Ohio,  possessed  a 
value  in  combination  and  from  use  in  connection  with  the 
property  and  capital  elsewhere,  which  could  as  rightfully 
be  recognized  in  the  assessment  for  taxation  in  the  instance 
of  these  companies  as  the  others." 

The  court  said  it  was  this  unity  of  use  which  enabled 
$23,400  of  horses,  wagons,  safes  and  so  on,  in  the  State 
to  produce  6275,446  in  a  single  year.  It  declared  that  the 
language  of  Justice  Lamar  in  the  case  of  Pacific  Express 
Co.  V.  Seibert,^  that  express  companies  have  no  tangible 
property  of  any  consequence  subject  to  taxation,  was  used 
with  reference  to  the  legislation  of  the  State  of  Missouri, 
and  had  no  application  to  the  scheme  of  taxation  now 
under  consideration.  The  property  taxed  in  this  case  had 
its  actual  situs  in  the  State,  and  was  therefore  subject  to 
the  State's  jurisdiction,  and  the  distribution  among  the 
several  counties  was  a  matter  of  regulation  for  the  State 
legislature.  There  was  no  attempt  to  tax  property  having 
a  situs  outside  the  State,  but  only  to  place  a  just  value  on 
that  within.      The  court  added,  at  page  227  :  — 

§  253.   Special   circviinstances  requiring;   deduction  must 
be  sliown. 

"  Special   circumstances    might   exist,    as  indicated    in 
Pittsburgh,  Cincinnati    &c.  Railway  v.  Backus,  154   U.  S 
421,  443,  which  would  require  the  value  of  a  portion  of 

1  142  U.  S.  339,  1.  c.  p.  354. 


284  VALUATION  OF  INTERSTATE  PROPEETIES.  §   253 

the  property  of  an  express  company  to  be  deducted  from 
the  value  of  its  plant  as  expressed  by  the  sum  total  of  its 
stock  and  bonds  before  any  valuation  by  mileage  could  be 
properly  arrived  at,  but  the  difficulty  in  the  cases  at  bar  is 
that  there  is  no  showing  of  any  such  separate  and  distinct 
property  which  should  be  deducted,  and  its  existence  is  not 
to  be  assumed.  It  is  for  the  companies  to  present  any 
special  circumstances  which  may  exist,  and,  failing  their 
doing  so,  the  presumption  is  that  all  their  property  is 
directly  devoted  to  their  business,  which  being  so,  a  fair 
distribution  of  its  aggregate  value  would  be  upon  the  mile- 
age basis. 

*'  The  States  through  which  the  companies  operate 
ought  not  to  be  compelled  to  content  themselves  with  a 
valuation  of  separate  pieces  of  property  disconnected  from 
the  plant  as  an  entirety,  to  the  proportionate  part  of  which 
they  extend  protection,  and  to  the  dividends  of  whose 
owners  their  citizens  contribute." 

The  classification  of  express  with  railroad  and  telegraph 
companies  as  subject  to  the  unit  rule  does  not  deny  them 
the  equal  protection  of  the  laws,  and  there  was  nothing  in 
the  procedure  here  used  which  was  obnoxious  to  the  con- 
stitutional provision,  i 

1  Justices  Gray,  Brewer,  Shiras  and  Peckham  concurred  with  the 
Chief  Justice;  but  strong  dissent  was  made  by  Justices  "White,  Field, 
Harlan  and  Brown.  The  opinion  filed  by  Justice  White  on  behalf  of 
those  dissenting  insisted  that  there  was  no  power  in  the  State  to  tax 
property  outside  of  its  jurisdiction,  which  in  effect  it  had  done  in  this 
case  under  the  theory  of  a  homogeneous  unit;  and  that  the  mere  fact 
that  the  same  owner  has  property  in  different  States  which  contribute 
to  his  earnings  does  not  create  such  a  unity  for  the  purposes  of  tax- 
ation as  to  make  the  property  located  in  one  State  taxable  in  another. 
It  was  asked,  why  could  not  the  same  rule  be  applied  to  a  corporation 
or  partnership  engaged  in  the  dry  goods  business,  or  any  other  business 
having  branches  in  different  States,  on  the  theory  that  there  was  a 
unity  of  earnings  between  the  agencies  in  all  the  establishments?  This 
would  warrant  any  State,  in  which  one  of  the  branches  was  established, 
in  taxing  the  whole  on  the  theory  of  unity. 


§  254  VALUATION  OF  INTERSTATE  PROPERTIES.  285 

§  254.  Rehearing  of  express  company  cases  denied. 

A  motion  for  rehearing  was  filed  in  this  case,  with  ex- 
haustive briefs.  The  rehearing  was  claimed  on  different 
oTounds,  including  the  extreme  importance  and  far-reaching 
effect  of  the  decision,  the  entire  novelty  of  the  questions 
discussed  and  the  points  necessarily  determined  by  the  judg- 
ment. It  was  urged  that  the  opinion  was  inconsistent  with 
the  opinion  in  the  railway  case,^  and  the  Indiana  telegraph 
case. 2  The  doctrine  of  unity  in  use  applied  to  railroad  and 
telegraph  companies,  counsel  also  argued,  has  no  applica- 
tion to  the  horses  and  wagons  and  other  property  employed 
by  an  express  company,  as  there  is  no  physical  unity,  and 
the  doctrine  of  unity  in  use  of  property  which  has  no  con- 
nection except  in  the  fact  of  its  employment  is  no  basis  for 
taxation.^ 

The  petition  was  denied  in  a  vigorous  opinion  by  Justice 
Brewer,*  who  said :  — 

"  The  importance  of  the  questions  involved,  the  close  di- 
vision in  this  court  upon  them,  and  the  earnestness  of  counsel 
for  the  express  companies  in  their  original  arguments,  as 
well  as  in  their  briefs  on  this  application,  lead  those  of  us 
who  concurred  in  the  judgments  to  add  a  few  observations 
to  what  has  hitherto  been' said." 

After  saying  that  the  court  had  repeatedly  affirmed  the 

For  opinion  of  the  Circuit  Court,  see  Otiio  v.  Jones,  51  Ohio  492. 

Judge  Taft,  U.  S.  Circuit  Judge,  had  held  the  law  invalid  under  the 
Constitution  of  Ohio,  Adams  Ex.  Co.  v.  Poe,  CI  Fed.  Rep.  470,  but  sub- 
sequent to  the  ruling  of  the  State  court  held  it  valid,  W.  U.  Tel.  Co. 
V.  Poe,  64  Fed.  Rep.  9,  and  the  judgment  was  affirmed  in  the  U.  S. 
Circuit  Court  of  Appeals,  Sanford  v.  Poe,  37  U.  S.  App.  378,  and  69 
Fed.  Rep.  546. 

1  C.  C.  C.  and  St.  L.  Railway  Co.  v.  Baclius,  154  U.  S.  439. 

2  Western  U.  Tel.  Co.  v.  Taggart,  163  U.  S.  1,  supra. 

3  See  brief  by  James  C.  Carter  of  New  York,  and  Lawrence  Max- 
well, Jr.,  in  report  of  case,  166  U.  S.  217. 

*  166  U.  S.  217. 


286'  VALUATION  OF  INTERSTATE  PROPERTIES.  §    255 

risht  of  a  State  to  tax  at  their  full  value  all  the  instru- 
mentalities  used  in  commerce,  that  the  taxes  complained 
of  in  this  case  were  not  privilege  taxes,  but  purported  to  be 
upon  the  property  of  the  companies,  and  that  the  burden 
of  the  complaint  therefore  was  that  it  was  an  attempted 
taxation  of  property  beyond  the  limits  of  the  State,  he 
continued,  page  218  :  — 

§  255.  Intangible  property  of  corporation  properly  con- 
sidered in  valuation. 

"  But  this  contention  practically  ignores  the  existence 
of  intangible  property,  or  at  least  denies  its  liability  for 
taxation.  In  the  complex  civilization  of  to-day  a  large 
portion  of  the  wealth  of  a  community  consists  in  intan- 
gible property,  and  there  is  nothing  in  the  nature  of  things 
or  in  the  limitations  of  the  Federal  Constitution  which 
restrains  a  State  from  taxing  at  its  real  value  such  intangible 
property."     *     *     * 

' '  It  matters  not  in  what  this  intangible  property  con- 
sists, whether  privileges,  corporate  franchises,  contracts  or 
obligations.  It  is  enough  that  it  is  property  which  though 
intangible  exists,  which  has  value,  produces  income  and 
passes  current  in  the  markets  of  the  world.  To  ignore 
this  intangible  property  or  to  hold  that  it  is  not  sub- 
ject to  taxation  at  its  accepted  value,  is  to  eliminate  from 
the  reach  of  the  taxing  power  a  large  portion  of  the 
wealth  of  the  country.  Now,  whenever  separate  articles 
of  tangible  property  are  joined  together,  not  simply  by  a 
unity  of  ownership,  but  in  a  unity  of  use,  there  is  not  in- 
frequently developed  a  property,  intangible  tliough  it  may 
be,  which  in  value  exceeds  the  aggregate  of  the  value  of 
the  separate  pieces  of  tangible  property.  Upon  what 
theory  of  substantial  right  can  it  be  adjudged  that  the 
value  of  this  intangible  property  must  be  excluded  from 


§   256  VALUATION  OF  INTERSTATE  PROrERTIES.  287 

the  tax  lists,  and  the  only  property  placed  thereon  be  the 
separate  pieces  of  tangible  property?" 

After  showing  that  the  ex[)ress  companies  had  intangible 
property  and  that  this  was  ^yhat  gave  value  to  their  stock, 
and  illustrating  hy  the  case  of  the  Henderson  Bridge  Com- 
pany, the  validity  of  the  taxation  of  which  was  before  the 
court  in  another  case,  the  court  said,  page  220 :  — 

"  It  is  a  cardinal  rule  which  should  never  be  forgotten 
that  whatever  property  is  worth  for  the  purposes  of  income 
and  sale  it  is  also  worth  for  purposes  of  taxation."  The 
substance  of  right  demands  that,  whatever  be  the  real  value 
©f  any  property,  that  value  may  be  accepted  by  the  State 
for  the  purposes  of  taxation,  and  this  ought  not  to  be 
evaded  by  any  mere  confusion  of  words.  The  court  con- 
tinued at  page  221 :  — 

§256.  Distinction  Ijetween  construction  of   statute  and 
taxing'  power  of  State. 

"  A  distinction  must  be  noticed  between  the  construction 
of  a  State  law  and  the  power  of  a  State.  If  a  statute, 
properly  construed,  contemplates  only  the  taxation  of 
horses  and  wagons,  then  those  belonging  to  an  express 
company  can  be  taxed  at  no  higher  value  than  those  be- 
longing to  a  farmer.  But  if  the  State  comprehends  all 
property  in  its  scheme  of  taxation,  then  the  good-will  of 
an  organized  and  established  industry  must  be  recognized 
as  a  thing  of  value.  The  capital  stock  of  a  corporation 
and  the  shares  in  a  joint-stock  company  represent  not  only 
the  tangible  property,  but  also  the  intangible,  including 
therein  all  corporate  franchises,  and  all  contracts,  privi- 
leges and  good- will  of  the  concern." 

After  stating;  the  values  of  different  classes  of  tangible 
property  belonging  to  the  company  and  the  valuation  of  its 
capital  stock  in  the  market,  the  court  said,  page  222  :  — 

"  But  what  a  mockery  of  substantial  justice  it  would  be 


288  VALUATION  OF  INTERSTATE  TROPERTIES.  §    258 

for  a  corporation  whose  property  is  wortli  to  its  stock- 
holders for  the  purposes  of  income  and  sale  $16,800,000, 
to  be  adjuged  liable  for  taxation  upon  only  one-fourth  of 
that  amount.  The  value  which  property  bears  in  the  mar- 
ket, the  amount  for  which  its  stock  can  be  bought  and  sold, 
is  the  real  value.  Business  men  do  not  pay  cash  for  prop- 
erty in  moonshine  or  dreamland.  They  buy  and  pay  for 
that  which  is  of  value  in  its  power  to  produce  income,  or 
for  purposes  of  sale. 

§  257.  Facts   warranting   deduction   must  be   shown   by 
company. 

"  It  is  suggested  that  the  company  may  have  bonds,  stocks 
or  other  investments  which  produce  a  part  of  the  value  of 
its  capital  stock  and  which  have  a  special  situs  in  other 
States  or  are  exempt  from  taxation.  If  it  has,  let  it  show 
the  fact.  Courts  deal  with  things  as  they  are,  and  do  not 
determine  rights  upon  mere  possibilities.  If  half  of  the 
property  of  the  Adams  Express  Company,  which  by  its 
own  showing  is  worth  $16,000,000  and  over,  is  invested  in 
United  States  bonds,  and  therefore  exempt  from  taxation, 
or  invested  in  any  way  outside  the  business  of  the  company 
and  so  as  to  bo  subject  to  purely  local  taxation,  let  that  fact 
be  disclosed,  and  then  if  the  State  of  Ohio  attempts  to  in- 
clude within  its  taxing  power  such  exempted  property,  or 
property  of  a  different  situs,  it  will  be  time  enough  to  con- 
sider and  determine  the  rights  of  the  company.  That  if 
such  facts  exist  they  must  be  taken  into  consideration  by  a 
State  in  its  proceedings  under  such  tax  laws  as  are  here 
presented  has  been  heretofore  recognized  and  distinctly 
affirmed  by  this  court." 

§  258.  Situs   of   intangible   property   of   interstate    com- 
pany. 

As  to  the  situs  of  the  property,  the  court  said,  page 
223:— 


§    258  VALUATION  OF  INTERSTATE  PROPERTIES.  289 

"But  where  is  the  situs  of  this  intangible  property? 
The  Adams  Express  Company  has,  according  to  its  show- 
ing, in  round  numbers  $4,000,000  of  tangible  property 
scattered  through  different  States,  and  with  that  tangible 
property  thus  scattered  transacts  its  business.  By  the 
business  which  it  transacts,  by  combining  into  a  single  use 
all  these  separate  pieces  and  articles  of  tangible  property, 
by  the  contracts,  franchises  and  privileges  which  it  has  ac- 
quired and  possesses,  it  has  created  a  corporate  property 
of  the  actual  value  of  $16,000,000.  Thus,  according  to 
its  figures,  this  intangible  property,  its  franchises,  privi- 
leges, etc.,  is  of  the  value  of  $12,000,000,  and  its  tangible 
property  of  only  $4,000,000.  Where  is  the  situs  of  this 
intangible  property?  Is  it  simply  where  its  home  office  is, 
where  is  found  the  central  directing  thought  which  con- 
trols the  workings  of  the  great  machine,  or  in  the  State 
which  gave  it  its  corporate  franchise ;  or  is  that  intangible 
property  distributed  wherever  its  tangible  property  is  located 
audits  work  is  done?     Clearly,  as  we  think,  the  latter." 

It  was  then  shown  that  the  maxim  '-'•  mohilia  personam 
sequuntur'^  was  never  of  universal  application  and  has 
seldom  interfered  with  the  right  of  taxation,  and  that, 
while  a  corporation  is  a  citizen  of  the  State  which  creates 
it,  for  the  transaction  of  its  business  it  goes  into  various 
States,  and  wherever  it  goes  as  a  corporation  it  carries  with 
it  its  franchise.  The  franchise  to  do  is  an  independent 
franchise,  or  rather  a  combination  of  franchises,  embracing 
all  things  which  the  corporation  is  given  power  to  do,  and 
it  is  as  much  a  thing  of  value  as  is  the  franchise  to  be. 
Franchises  to  do  go  wherever  the  work  is  done.  Ke- 
ferring  to  the  Southern  Pacific  Railway,  which  is  said  to 
have  no  property  in  Kentucky,  the  State  where  it  is  char- 
tered, but  has  a  vast  amount  on  the  Pacific  slope,  the  court 
asked:  — 

"  Do  not  these  intangible  properties  —  these  franchises 

19 


290  VALUATION    OF  INTERSTATE  PROPERTIES.  §    259 

to  do  —  exercised  in  connection  with  the  tangible  property 
which  it  holds,  create  a  substantive  matter  of  taxation  to 
be  asserted  by  every  State  in  which  that  tangible  property 
is  found?  " 

After  saying  that  perhaps  injustice  to  corporations  would 
result  by  the  conflicting  action  of  different  States  and  that 
the  courts  might  be  called  upon  to  relieve  against  such 
abuses,  and  yet  that  all  such  possibilities  did  not  equal  the 
wrong  which  sustaining  the  contention  of  the  appellant 
would  at  once  do,  the  court  concluded  as  follows,  p.  225:  — 

"  The  injustice  of  this  speaks  for  itself.  In  conclu- 
sion, let  us  say  that  this  is  eminently  a  practical  age ; 
that  courts  must  recognize  things  as  they  are  and  as  posses- 
sing a  value  which  is  accorded  to  them  in  the  markets  of 
the  world,  and  that  no  finespun  theories  about  situs  should 
interfere  to  enable  these  large  corporations,  whose  business 
is  carried  on  through  many  States,  to  escape  from  bearing 
in  each  State  such  burden  of  taxation  as  a  fair  distribution 
of  the  actual  value  of  their  property  among  those  States 
requires.     The  petition  for  a  rehearing  is  denied." 

§  259.  Kentucky  express  company  case. 

The  case  of  Adams  Express  Co.  v.  Kentucky ,i  involved 
the  Kentucky  statute  imposing  a  tax  upon  every  corporation 
having  or  exercising  any  exclusive  privilege  or  franchise  not 
allowed  by  law  to  natural  persons,  or  performing  any  pub- 
lic service.  The  statute  provided  that,  in  addition  to  other 
taxes  imposed  by  law,  every  such  corporation  should  pay  an 
annual  tax  on  its  franchise  to  the  State,  and  a  local  tax 
thereon  to  the  county.  The  court  sustained  the  tax  thereby 
levied  upon  the  express  company,  saying  in  an  opinion  by 
Chief  Justice  Fuller,  that,  taking  the  whole  act  together, 
the  word  "  franchise  "  in  the  statute  was  not  employed  in 

1  166  U.  S.  171. 


§   260  VALUATION  OF  INTERSTATE  PROPERTIES.  291 

a  technical  sense,  but  that  the  legislative  intention  was  plain 
that  the  entire  property,  tangible  and  intangible,  of  all 
foreign  and  domestic  corporations  and  all  foreign  and 
domestic  companies  possessing  no  franchise  should  be  val- 
ued as  an  entirety,  the  value  of  the  tangible  property  be 
deducted  and  the  value  of  the  intangible  property  thus 
ascertained  be  taxed  under  these  provisions.  The  reason- 
ing of  the  Ohio  case  applied  here.^ 

§  260.  Power  of  State  in   valuing-    interstate    properties 
as  defined  by  Supreme  Court. 

The  unit  rule  of  valuation,  that  is,  the  valuation  of  the 
portion  in  the  State  of  the  entire  property,  tangible  and  in- 
tangible, in  and  out  of  the  State,  as  an  entiretv,  being  the 
value  in  use  as  distinct  from  the  value  of  separate  detached 
parcels  located  in  the  State,  has  thus  been  sustained  by  the 
United  States  Supreme  Court  in  relation  to  railroad,  tele- 
gra[)h  and  express  companies.  But  the  value  of  property 
outside  of  the  State,  which  is  necessarily  involved  in  valu- 
ing interstate  property  as  an  entirety,  is  only  allowed  to  be 

1  The  same  four  judges  dissented  in  this  case  as  in  the  Ohio  case, 
Justice  White  on  their  behalf  saying  that  this  differed  from  the  Ohio  case, 
io  that  there  the  statute  purported  only  to  tax  the  tangible  property 
within  the  State,  but  empowered  the  assessing  board  to  consider  its 
vuiue  as  augmented  by  the  use  to  which  such  property  might  be  put. 
*'  In  other  words,  the  Ohio  law,  as  construed  by  the  Supreme  Court  of 
that  State,  taxed  only  tangible  property  within  the  State  enhanced  in 
value  by  intangible  elements  outside  the  State.  We  considered,  in  dis- 
senting in  the  Ohio  case,  that  this  was  a  mere  disguise,  a  distinction 
without  a  difference,  but  the  court  held  otherwise.  In  this  case,  by  the 
law  in  question,  the  mask  is  thrown  off,  and  what  we  conceive  to  be  logi- 
cally the  thin  disguise  under  which  the  courts  of  Ohio  supported  its 
statute  is  not  asserted  to  exist,  but  the  Kentucky  statute,  in  unambigu- 
ous and  unmistakable  language,  imposes  the  imperative  duty  upon  the 
assessing  board  to  assess  property  both  in  and  out  of  the  State.  That  is 
to  say,  it  leaves  nothing  to  implication  or  to  evasion,  but  declares  in  plain 
English  that  property  in  and  out  of  the  State  shall  be  assessed." 


292  VALUATION  OF  INTERSTATE  PROPERTIES.  §   261 

considered  as  a  means  of  arriving  at  the  value  of  the  prop- 
erty which  is  within  the  State,  that  is,  the  State's  propor- 
tionate part  of  the  value  of  the  entire  property.  In  the 
absence  of  evidence  to  show  that  such  apportionment  is  un- 
just, the  State  may  determine  what  part  of  the  entire  prop- 
erty is  located  within  the  State  by  the  mileage  rule  of  ap- 
portionment. That  rule  therefore  has  not  been  sustained 
as  an  absolute  rule  in  the  case  of  interstate  properties, 
although  it  seems  to  have  been  in  the  case  of  intra-state 
properties,  that  is,  such  a  method  of  intra-state  apportion- 
ment violates  no  Federal  law.^  Thus  the  court  in  the 
Indiana  railroad  case^  said  that  the  Indiana  statute  did  not 
require  that  the  value  of  the  road  should  be  "  determined 
absolutel}' ' '  by  dividing  the  gross  value  on  the  mileage  basis, 
but  only  that  the  amount  of  stock  and  indebtedness  should 
be  "  presented  for  consideration"  by  the  State  board;  and 
that  it  is  ordinarily  true  that  the  mileage  apportionment 
is  fair  and  just. 

§  261.  Evidence     of     inapplicability     of      mileage      rule 
admissible. 

As  incident  to  this  unit  rule  of  valuation  with  mileage 
apportionment,  the  corporation  has  the  right  to  show  by 
all  proper  evidence  that  the  application  of  the  mileage  rule 
of  apportionment  to  such  valuation  is  for  any  reason  im- 
perfect and  injust.  Thus  it  may  show  that  it  holds  projD- 
erty  included  in  such  valuation  as  an  entirety  which  is 
exempt  from  taxation.  It  may  also  show  that  its  prop- 
erty in  other  States  is  of  disproportionate  value,  as,  for 
instance,  that  it  is  located  in  a  more  densely  settled  com- 
munity, where  it  is  proportionately  more  productive,  or 
consists  of  terminals  in  larore  cities  of  other  States.     All 


1  See  supra,  Sec.  240. 

2  154  U.  S.  430. 


§  262  VALUATION  OF  INTERSTATE  PROPERTIES.  293 

such  facts  are  relevant  as  bearing  upon  the  value  of  the 
State's  portion  of  the  entire  property.  A  State  statute  or 
procedure  by  a  State  under  a  statute,  which  denied  the  com- 
pany the  opportunity  of  proving  such  facts,  would  doubt- 
less be  held  invalid.  Thus  in  the  Indiana  telegraph  com- 
pany case,  supra,  §  250,  the  statute  was  held  valid  because 
it  had  been  construed  by  the  Supreme  Court  of  the  State  as 
requiring  a  deduction  from  the  valuation  if  such  circum- 
stances were  shown. 

§  262.   Stock  market  quotations  as  evidence  of  value. 

In  determining  the  value  of  the  entire  property  under 
the  unit  rule,  the  State  authorities  may  consider  any  facts 
tending  to  show  that  value.  Thus  the  stock  market  quot- 
ations of  the  company's  securities  may  be  considered 
because  the  stock  and  indebtedness  represent  thepropertv. 
But  they  are  not  to  be  regarded  as  conclusive  standards  or 
tests  of  value,  and  they  have  not  been  declared  to  be  such 
b}^  the  Supreme  Court.  They  are  indicia  of  the  then  ex- 
isting public  estimate  of  the  value  of  the  company's  prop- 
erty as  shown  by  the  result  of  the  relative  pressure  of  buy- 
ing and  selling  orders  for  small  interests  in  that  propertv. 
In  the  language  of  the  Supreme  Court  ^  such  quotations 
represent  "  the  faith  which  a  purchaser  of  stock  in  such  a 
company  has  in  the  ability  with  which  the  company  will 
be  managed,  and  in  the  capacity  to  make  future  earnings. 
It  may  be  well  or  ill  founded.  It  is  but  matter  of  opin- 
ion which  in  itself  is  not  property.  While  the  value  of 
the  property  is  one  of  the  material  factors  goilig  to  make 
up  the  market  value  of  the  stock,  yet  it  is  plainlvnot  the 
sole  one.  Mere  speculation  has  not  uncommonly  been  known 
to  exercise  a  potent  influence  on  the  market  price  of  stock. ' ' '' 

1  Pullman's  Car  Co.  v.  Transportation  Co.,  171  U.  S.  155.   * 

2  See  §  240,  supra.  This  case  Involved  the  value  of  the  property  of  a 
manufacturing  company  and  was    not  one  of  taxation.    The  franchise 


294       VALUATION  OF  INTERSTATE  PROPERTIES.      §  263 

The  taxino;  authorities  have  the  rio-ht  to  consider  such 
evidence,  but  as  evidence  only.  Thus  in  tlie  Indiana  rail- 
road case,  supra,  §  243,  the  certificate  of  the  assessing 
board  stated^  that  in  arriving  at  the  basis  of  the  estimate 
of  values,  the  board  had  considered  the  cost  of  construc- 
tion and  equipment,  the  market  value  of  the  stocks  and 
bonds,  the  gross  and  net  earnings,  and  all  other  matters 
appertaining  thereto  that  Avould  assist  it  in  arriving  at 
the  true   cash    value  of  the  same. 

§  263.  Presumption  that  all  evidence  submitted  was  con- 
sidered in  valuation. 

"Whatever  evidence,  relative  to  the  value  of  the  property 
as  an  entirety  and  the  disproportionate  value  of  the  prop- 
erty in  other  States,  is  submitted  to  the  assessing  board,  it 
is  presumed  that  the  board  takes  all  those  matters  into  con- 
sideration in  connection  with  its  information  relative  to  the 
total  amount  of  the  stock  and  indebtedness  of  the  company. 
There  can  be  no  presumption  that  the  board  took  into  con- 
sideration matters  which  were  not  properly  receivable  and 
properly  to  be  considered  in  making  such  valuation.  This 
is  the  rule  applied  in  all  cases  of  the  assessment  of  property 
for  taxation,  even  in  jurisdictions  where  a  judicial  review  of 
the  proceedings  of  tax  assessing  boards  is  allowed.  The 
presumption  is  always  that  the  valuation  is  based  upon  the 
evidence  submitted. ^     It  is  true  however  that  in  this  class 

value  was  excluded  as  not  properly  considered  in  determining  the  value 
of  the  property.  But  the  other  reason  for  excluding  market  value,  the 
existence  of  speculative  considerations  thereiUj  may  apply  to  a  case  of 
taxation.  See  case  of  People  ex  rel.  v.  Coleman,  126  N.  Y.  433,  for 
discussion  of  the  relation  of  market  value  to  "  actual  value."  The  court 
said  that  Vfhen  the  amount  of  capital  and  surplus  was  undisclosed  and 
unknown,  the  assessor  could  consider  the  market  vaSue  not  as  the  thing 
to  be  valued  and  taxed,  but  as  an  aid  to  discovering  actual  value. 

1  154  U.  S.  433. 

2  See  also  infra,  •'  Due  Process  of  liaw  in  the  Assessment  of  Inter- 
state Properties."     See  also  an  able  review  of  the  decisions  of  the  Su- 


§   263  VALUATION  OF  INTERSTATE  PROPERTIES.  295 

of  cases  there  is  sometimes  great  practical  difficulty  in  deter- 
mining that  an  assessing  board  considered  only  proper 
elements  of  valuation  in  calculating  the  value  of  propertv 
within  the  State,  and  this  may  be  a  practical  embarrassment 
in  the  judicial  review  of  the  action  of  such  quasi  judicial 
tribunals. 

As  to  the  right  to  have  the  propertv,  when  the  value  in 
the  State  is  ascertained,  assessed  equally  with  other  prop- 
erty, see  ^?^/V'a,  Chapter  XYI,  "  Equal  Protection  of  the 
Laws." 


preme  Court  in  relation  to  the  taxation  of  interstate  carriers  in  the  ad- 
dress of  Robert  Mather,  Esq.,  of  Chicago,  on  "  Constitutional  Construc- 
tion and  the  Commerce  Clause,"  before  the  American  Bar  Association 
in  1897;  20  Vol.  Eeports  of  Am.  Bar  Ass'n.  279. 


CHAPTEE  IX. 

TAXATION  OF  NATIONAL  BANKS. 

§  2'64.  Taxing  authority  of  States  over  national  banks. 

265.  Amendment  of  1868. 

266.  Supreme  Court  on  U.  S.  statute  authorizing   State   taxation  of 

national  baniis. 

267.  Method  of  Slate  taxation  allowed  by  U.  S.  statute  is  exclusive. 

268.  State  franchise  tax  not  enforceable  against  national  banks. 

269.  State  may  require  bank  to  pay  tax  for  shareholders. 

270.  Place  of  taxation. 

271.  Manner  of  assessment. 

272.  Real  estate  in  other  Slates  not  deducted  from  value  of  shares. 

273.  Territories  have  same  taxing  power  as  States  over  national  banks. 

274.  No  deduction  on  account  of  holding  United  States  securities. 

275.  Discrimination  through   taxation   of   State   banks  on   capital  or 

property. 

276.  Other  moneyed  capital  is  "other  taxable  moneyed  capital." 

277.  Equality  of  taxation  with  other  moneyed  capital. 

278.  Discriminations  through  exemptions  from  taxation. 

279.  Allegations  of  discriminating  exemption  held  to  require  answer. 

280.  Rules  of  Supreme  Court  as  to  discrimination. 

281.  Discriminating  exemption  must  be  of  competing  moneyed  capital. 

282.  Meaning  of  "  other  moneyed  capital." 

283.  No  discrimination   in  New  York  taxation   of  railroad,   business, 

mining  or  insurance  companies. 

284.  No  discrimination  in  New  York  taxation  of  trust  companies. 

285.  Nor  in  exemption  of  savings  banks,  building  and  loan  associations 

or  stock  in  foreign  corporations. 

286.  Discrimination  through  deduction  of  debts  from  "other  moneyed 

capital." 

287.  No  discrimination    in    deduction   of    debts  from   non- competing 

capital. 

288.  No  discrimination  in  deduction  of  debts  of  unincorporated  banks. 

289.  Discrimination  through  failure  to  assess  other  moneyed  capital. 

290.  Discrimination  must  be  substantial. 

291.  Difference  in  the  rate  of  taxation  not  necessarily  discriminative. 

292.  Equality  of  taxation  requires  equality  in  valuation  as  in  rate  of 

taxation. 

293.  Supreme  Court  on  assessors'  practice  of  valuation. 

294.  Inequality  must  be  intentional  and  habitual. 

(296) 


§   264  STATE  TAXATION  OF  NATIONAL   BANKS.  297 

§  295.  Mere  mistake  in  judgment  no  discrimination. 

296.  Formal  resolution  not  necessary  for  intentional  discrimination. 

297.  Difference  in  valuation  between  different  classes  of  personalty  not 

discriminative  against  national  banks. 

298.  Taxation  of  real  estate  of  national  banks. 

299.  Double  taxation  of  national  banks. 

300.  Enforcement  of  tax. 

301.  Visitorial  power  of  State  over  national  banks. 

§  264.  Taxing  authority  of  States  over  national  banks. ^ 

National  banks,  organized  under  Act  of  Congress,  are 
instrumentalities  of  the  Federal  government  created  for 
national  public  purposes,  and  as  such  are  subject  to  the 
paramount  authority  of  the  United  States.  It  has  been  held 
by  the  Supreme  Court,  not  onlj^that  any  attempt  b}^  a  State 
to  define  their  duties  or  control  the  conduct  of  their  affairs 
is  absolutely  void,  but  that  the  "  respective  States  would  be 
wholly  without  power  to  levy  any  tax,  either  direct  or  in- 
direct, upon  the  national  banks,  their  property,  assets  or 
franchises,  were  it  not  for  the  permissive  legislation  of 
Congress."  ^ 

The  first  Act  of  Congress  providing  for  the  organization 

1  A  number  of  decisions  have  been  rendered  in  the  Slate  courts  and 
United  States  Circuit  Courts  on  the  subject  of  State  taxation  of  national 
banks,  where  subsequently  the  questions  discussed  have  been  definitely 
decided  by  the  Supreme  Court.  Other  decisions  of  these  courts  relate  to 
the  question  of  construction  of  State  statutes,  which  are  not  within  the 
ecope  of  this  work.  It  has  been  the  aim  however  to  give  such  of  the 
State  decisions  as  apply  and  distinguish  the  rules  laid  down  by  the 
Supreme  Court,  or  which  bear  upon  questions  not  included  in  the"  de- 
cisions of  that  court. 

2  Owensboro  National  Bank  v.  Owensboro,  173  U.  S.  664,  1.  c.  p.  668; 
Davis  V.  Elraira  Savings  Bank,  161  U.  S.  276.  This  limitation  upon  the 
taxing  power  of  the  State  is  more  comprehensive  than  that  laid  down  by 
the  court  in  McCuUoch  v.  Maryland,  sujyra,  §  7.  The  taxes  declared  void 
in  that  case  and  in  Osborn  v.  United  Slates,  supra,  §  8,  were  upon  the 
operations  of  the  bank,  and  the  ruling  was  declared  not  to  extend  to 
a  tax  on  the  real  property  of  the  bank  nor  to  a  tax  on  the  interest  of 
citizens  in  the  bank,  when  taxed  in  common  with  other  property  of  the 
same  description. 


298  STATE  TAXATION  OF  NATIONAL  BANKS.  §   265 

of  national  banks,  passed  February  25,  1863,i  contained 
no  grant  of  power  to  the  States  to  tax  national  banks  in  any 
form;  but  the  amendatory  Act  of  June  3,  1864,^  section 
41,  provided  as  follows:  — 

*'(1)  Provided  that  nothing  in  this  act  shall  be  con- 
strued to  prevent  all  the  shares  in  any  of  said  associations, 
held  by  any  person  or  body  corporate,  from  being  included 
in  the  valuation  of  the  personal  property  of  such  person  or 
corporation  in  the  assessment  of  taxes  imposed  by  or  under 
State  authority,  at  the  place  where  such  bank  is  located, 
and  not  elsewhere,  but  not  at  a  greater  rate  than  is  assessed 
upon  other  moneyed  capital  in  the  hands  of  individual 
citizens  of  such  State.  (2)  Provided,  further,  that  the 
tax  so  imposed  under  the  laws  of  any  State  upon  the  shares 
of  any  of  the  associations  authorized  by  this  act  shall  not 
exceed  therate  imposed  upon  the  shares  of  any  of  the  banks 
organized  under  authority  of  the  State  where  such  associa- 
tion is  located.  (3)  Provided,  also,  that  nothing  in  this 
act  shall  exempt  the  real  estate  of  associations  from  either 
State,  county,  or  municipal  taxes  to  the  same  extent,  accord- 
ing to  its  value,  as  other  real  estate  is  taxed." 

It  is  also  provided  in  section  40  that  the  president  and 
cashier  shall  cause  to  be  kept  a  full  and  correct  list  of  the 
names  and  residences  of  all  the  shareholders  and  the  num- 
ber of  shares  held  by  each,  in  the  banking  office,  and  that 
the  list  shall  be  subject  to  the  inspection  of  all  shareholders 
and  creditors  of  the  association  and  the  officers  authorized 
to  assess  taxes  under  State  authority,  during  the  business 
hours  of  each  day. 

§  265.  Amendment  of  1868. 

In  1868,  the  section  of  the  statute  authorizing  the  taxa- 
tion  of  national  banks  was  amended  and   re-enacted  in  the 

1  c.  58,  12  Statutes  665. 

2  c.  106,  13  Statutes  99. 


§  265  STATE  TAXATION  OF  NATIONAL  BANKS.         299 

.  form  in  which  it  has  since  appeared  in  the  Revised  Statutes, 
as  follows :  — 

"  Sec.  5219.  Nothing  herein  shall  prevent  all  the  shares 
in  any  association  from  being  included  in  the  valuation  of 
the  personal  property  of  the  owner  or  holder  of  such  shares, 
in  assessing  taxes  imposed  by  authority  of  the  State  in  which 
the  association  is  located ;  but  the  legislature  of  each  State 
may  determine  and  direct  the  manner  and  place  of  taxing 
all  shares  of  national  banking  associations  located  within 
the  State,  subject  only  to  the  two  restrictions,  that  the  tax- 
ation shall  not  be  at  a  greater  rate  than  is  assessed  upon 
other  moneyed  capital  in  the  hands  of  individual  citizens  of 
such  State,  and  that  the  shares  of  any  national  banking 
association  owned  by  non-residents  of  any  State,  shall  be 
taxed  in  the  city  or  town  w^here  the  bank  is  located,  and 
not  elsewhere.  Nothing  herein  shall  be  construed  to 
exempt  the  real  property  of  associations  from  either  State, 
county,  or  municipal  taxes  to  the  same  extent,  according 
to  its  value,  as  other  real  property  is  taxed." 

It  will  be  observed  that  the  provision  in  the  original  act, 
that  the  tax  should  not  exceed  the  rate  imposed  upon  the 
shares  of  any  of  the  banks  authorized  under  the  authority 
of  the  State  where  the  association  was  located,  is  stricken 
out.  This  amendment  however  was  not  material,  as  the 
prohibition  of  discrimination  in  favor  of  State  banks  is  in- 
cluded in  the  provision  that  the  shares  shall  be  taxed  at  no 
greater  rate  than  is  assessed  upon  "  other  moneyed  capital" 
in  the  hands  of  individual  citizens  of  the  State ;  for  this 
clearly  includes  shares  of  stock  in  State  banks. ^  The  only 
other  amendment  relates  to  the  place  of  assessment,  the 
original  act  providing  that  the  assessment  must  be  at  the 
place  where  the  bank  is  located  and  not  elsewhere,  while  in 
the  amended  act  the  legislature  may  determine  the  manner 

1  Mercantile  Bank  v.  New  York,  121  U.  S.,  p.  156. 


300  STATE  TAXATION  OF  NATIONAL  BANKS.  §   267 

and  place  of  taxation,  subject  to  the  restriction  as  to  place, 
that  the  shares  of  nonTi'esidents  shall  be  taxed  at  the  loca- 
tion of  the  bank. 

§  266.  Supreme  Court  on  TJ.  S.  statute  authorizing-  State 
taxation  of  national  banks. 

The  Supreme  Court  in  a  recent  case,^  after  quoting  this 
statute,  section  5219,  says,  page  669 :  — 

"This  section,  then,  of  the  Revised  Statutes  is  the 
measure  of  the  power  of  a  State  to  tax  national  banks, 
their  property  or  their  fi-anchises.  By  its  unambiguous 
provisions  the  power  is  confined  to  a  taxation  of  the  shares 
of  stock  in  the  names  of  the  shareholders  and  to  an  assess- 
ment of  the  real  estate  of  the  bank.  Any  State  tax  there- 
fore which  is  in  excess  of  and  not  in  conformity  to  these 
requirements  is  void. 

"  So  self-evident  are  these  conclusions  that  the  adjudi- 
cated cases  justify  the  deduction  that  they  have  been  ac- 
cepted from  the  beginning  as  axiomatic  and  unquestioned, 
since  the  controversies  as  to  taxation  of  national  banks 
illustrated  in  the  opinions  of  this  court  mainly  depend,  not 
upon  any  attempted  exercise  of  a  power  to  tax  the  property 
and  franchises  of  the  banks,  but  involved  controversies  as 
to  whether,  when  the  shares  of  stock  in  the  names  of  the 
shareholders  had  been  assessed  according  to  law,  the  tax 
could  be  imposed  upon  them  because  of  alleged  discrimina- 
tion or  other  illegalities." 

§  267.  Method  of  State  taxation  allowed  hy  U.  S.  statute 
is  exclusive. 

The  taxing  power  of  the  State  in  relation  to  national 
banks  thus  resting  upon  the  permission  of  Congress,  and 
Congress  having  provided  the  method  in  which  this  power 
may  be  exercised,  that  method  excludes  any  other. 

1  Owensboro  National  Bank  v.  Owensboro,  173  U.  S.  664. 


§  267      STATE  TAXATIOX  OF  NATIONAL  BANKS.        301 

No  license  therefore  can  be  exacted  by  the  State  or 
under  State  authority  for  the  privilege  of  carrying  on 
the  business  of  a  national  bank,^  nor  can  an  occupa- 
tion tax  be  imposed, 2  nor  can  a  tax  levied  by  a  State 
on  the  president  of  each  of  the  banks  of  the  State  be 
enforced  as  to  the  president  of  a  national  bank.  ^  The 
State  can  tax  the  real  estate  of  the  bank  as  other  real  estate 
is  taxed,  because  authority  to  do  so  is  expressly  given  by 
the  Act  of  Congress.  But  this  is  the  only  tax  which  can  be 
levied  upon  the  property  of  the  bank,  for  the  only  other 
tax  authorized  is  upon  the  shares  of  the  shareholders.  It 
follows  therefore  that  no  tax  can  be  levied  by  the  State 
upon  the  personal  assets  of  the  bank,  such  as  safes,  office 
furniture,  etc.,  *  and  this  is  equally  true  whether  the  bank 
is  solvent  or  insolvent.^  Thus  the  assets  of  the  bank, 
when  in  the  hands  of  a  receiver,  are  not  taxable.  The 
Supreme  Court  said,  in  Rosenblatt  v.  Johnston,  that  if  the 
shares  had  any  value  they  were  taxable  in  the  hands  of  the 
holders,  and  that  the  property  held  by  the  receiver  was 
exempt  to  the  same  extent  as  it  was  when  in  the  possession 
of  the  bank  before  his  appointment.  A  tax  on  the  per- 
sonal property  of  a  national  bank  is  invalid,  even  though 

^  Second  National  Bank  of  Tltusville  (Pa.)  v.  Caldwell,  13  Fed.  Rep. 
429;  Carthage  v.  First  National  Bank  of  Carthage,  71  Mo.  508. 

2  Brooks  V.  State  (Texas),  58  S.  W.  Rep.  1033;  Nat.  Bank  of  Chatta- 
nooga t?.  Mayor,  8  Hciskell  (Tenn.)  814.  National  banks  are  not  liable 
to  a  privilege  tax  imposed  by  a  city  ordinance  on  occupations  and  busi- 
ness transactions,  although  banks  and  banking  are  included  in  its  terms. 

3  Linton  v.  Childs,  105  Ga,  567. 

*  National  State  Bank  v.  Young,  25^  Iowa  311;  San  Francisco  v. 
Bank,  92  Fed.  273;  State  v.  First  Nat.  *Bank,  4  Nev.  348;  Fir.-t  National 
Bank  v.  Province,  20  Montana  374. 

6  Rosenblatt  v.  Johnston,  104  U.  S.  462.  See  also  First  National  Bank 
V.  San  Francisco,  129  Cal.  96;  Stapylton  v.  Thaggard,  91  Fed.  Rep. 
93,  and  33  C.  C.  A.  353;  City  of  Boston  v.  Beal,  5  C.  C.  A.  26,  First 
Circuit;  People  v.  National  Bank,  123  Cal.  53;  Covington  City  National 
Bank  v.  Covington,  21  Fed.  Rep.  484;  Woodward  v.  Ellsworth,  4  Colo. 
580;  Baker  v.  King  County,  17  Wash.  622. 


302  STATE  TAXATION  OF  NATIONAL  BANKS.  §    268 

the  legislature  has  made  no  provision  for  taxing  the  shares 
thereof,  and  the  tax  actually  levied  does  not  exceed  the  amount 
of  what  might  have  been  assessed  on  the  shares  under  local 
authority  therefor.^ 

§  268,  State  franchise   tax  not  enforceable   against   na- 
tional banks. 

« 

It  follows  that  a  national  bank  cannot  be  taxed  by  a 
State  under  a  statute  taxing  ' '  the  property  and  franchises 
of  every  corporation  having  or  exercising  any  special  or  ex- 
clusive privilege  or  franchise  not  allowed  by  law  to  natural 
persons,  or  performing  any  public  service."  This  was  the 
decision  in  a  case  from  Kentuck}' .  ^  The  State  Court  of  Ap- 
peals decided  that  the  taxation  of  national  banks  under  this 
statute  was  valid,  as  in  effect  it  was  equivalent  to  a  tax  upon 
the  shares  of  the  shareholders.  The  Supreme  Court  however 
reversed  this  decision,  and  said  that  the  argument  relied 
on,  if  adopted,  would  operate  to  destroy  the  power  to  tax 
which  the  Act  of  Congress  sanctions,  and  that,  as  a  general 
principle,  it  is  settled  that  the  taxation  of  property,  fran- 
chises and  rights  of  a  corporation  is  one  thing,  and  the  tax- 
ation of  the  shares  of  stock  in  the  names  of  the  share- 
holders quite  another.  The  court  said  in  this  regard,  at 
pao-e  681:  "  This  doctrine  has  been  applied  to  sanction  the 
taxation  of  the  one  where  the  other  was  covered  by  a  con- 
tract of  exemption.  As  a  result  of  its  application  much 
property  has  been  brought  within  the  range  of  the  taxing 
power  which  otherwise  would  escape  taxation." 

It  said  further  that,  as  there  is  no  equivalency  between 
the  assessment  of   the   bank   and  the    assessment  of   the 


1  First  Nat.  Bank  v.  San  Francisco,  129  Cal.  96. 

2  Owensboro  Nat.  Banli  v.  Owensboro,  173  U.  S.  664.  The  same 
statute  was  construed  by  the  court  in  the  case  of  Adams  Ex.  Co.  v.  Ky., 
166  U.  S.  171,  supra,  §  259,  and  Henderson  Bridge  Co.  v.  Kentucky,. 
supra,  §  197. 


§   268  STATE  TAXATION  OF  NATIONAL  BANKS.  303 

shares,  it  follows  that  the  tax,  which  was  assessed  on  the 
franchises  or  intangible  property  of  the  corporation,  was  not 
within  the  purview  of  the  authority  conferred  by  the  Act  of 
Congress,  and  was  therefore  illegal.  It  was  strongly  argued 
that  there  was  an  equivalency  i7i  fad ,  as  the  tax  was  no 
greater  than  that  which  would  have  been  imposed  in  the 
form  of  a  tax  levied  upon  the  shareholders,  the  franchise 
tax  being  based  upon  the  valuation  of  the  combined  sum  of 
the  par  of  the  stock,  the  surplus  and  undivided  profits.  But 
the  court  said  that  if  mere  coincidence  of  the  amount  and 
not  legal  power  were  the  test,  only  pure  questions  of  fact 
would  arise  in  any  given  case,  and  continued:  "  The  argu- 
ment that  public  policy  exacts  that  where  there  is  an 
equality  in  amount  between  an  unlawful  tax  and  a  lawful 
one  the  unlawful  tax  should  be  held  valid,  does  not  strike  us 
as  worthy  of  serious  consideration."  ^    The  court  added:  — 

"  The  system  of  taxation  devised  by  the  act  of  Congress 
is  entirely  efficacious  and  easy  of  execution.  By  its  enforce- 
ment, as  interpreted,  settled  policies  of  taxation  have  been 
evolved  embracing  large  amounts  of  property  which  would 
not  otherwise  be  taxable,  and  which,  as  we  have  seen,  will 
escape  taxation  if  the  past  development  of  the  sj'stcm  be 
destroyed  by  recognizing,  without  reason,  a  principle  incon- 
sistent with  the  law  and  destructive  of  the  safeguards  w^hich 
it  imposes." 

"  From  the  foregoing  conclusions,  it  results  that  as  the 
taxes  were  imposed  upon  the  bank  and  its  property  or 
franchise,  and  not  upon  the  shares  of  stock  in  the  name  of 
the  stockholders,  such  taxes  were  void."  ^ 


1  But  as  to  the  effect  of  equivalency  in  fact,  see  Postal  Tel.  Cable  Co.  v. 
Adams,  §  214,  supra. 

2  This  Kentucky  statute  was  also  discussed  in  Scobee  v.  Bean,  22 
Ky.  Law  Rep.  1076,  59  S.  W.  Rep.  860;  First  National  Bank  v.  Stone, 
88  Fed.  Rep.  409. 


304        STATE  TAXATION  OF  NATIONAL  BANKS.       §  269 

§  269.  State  may  require  bank  to  pay  tax  of  sharehold- 
ers. 

Though  the  tax  Ls  only  authorized  to  be  levied  upon  the 
shares  of  the  individual  shareholders,  and  there  is  no  au- 
thority to  levy  any  tax  upon  the  corporate  property  other 
than  a  tax  upon  the  real  estate,  the  State  may  require  that 
the  tax  levied  upon  the  shareholders  shall  be  paid  through 
the  bank,  which  is  thus  made  the  agency  of  the  share- 
holders in  paying  the  tax,  and  which  may  recoup  itseK 
from  the  dividends.  This  was  decided  by  the  Supreme 
Court  in  a  case  from  Kentucky,  wdiere  it  held^  that  the 
statutory  appointment  of  the  bank  to  pay  the  whole  tax 
in  salido  as  the  agent  of  the  shareholders  was  not  incon- 
sistent with  the  Federal  law,  authorizing  only  the  tax  upon 
the  shareholders.  It  was  further  said  that  this  was  the 
only  mode  by  which,  certainly  and  without  loss,  the  pay- 
ment of  the  tax  on  all  the  shares,  resident  and  non-resident, 
could  be  secured.  This  method  of  collection  was  justified 
by  experience,  and  it  was  not  to  be  rightly  inferred,  there- 
fore, that  Congress  intended  to  prohibit  it,  after  having 
expressly  permitted  the  State  to  levy  the  tax.^ 

Where  the  bank  has  been  made  liable  for  the  payment  of 

1  National  Bank  v.  Commonwealth,  9  Wall.  353. 

2  This  mode  of  collecting  the  tax  upon  national  bank  shares  has 
been  very  generally  adopted.  In  Hershire  v.  First  National  Bank,  35 
Iowa  272,  it  was  held  that  under  the  Iowa  statute  a  national  bank  was 
not  liable  for  the  taxes  assessed  against  the  shareholders  unless  it  had 
in  its  possession  dividends  or  property  belonging  to  them.  The  case 
was  distinguished  from  National  Bank  v.  Commonwealth,  9  Wall.  353. 
The  decision  was  based  on  the  difference  between  the  statute  in  issue 
and  that  of  Kentucky,  the  Iowa  statute  making  the  bank  simply  the 
agent  of  the  shareholders  to  pay  the  tax.  The  court  said  that  the  bank 
was  not  liable  for  the  taxes  except  as  other  agents  are  when  they  have 
money  belonging  to  the  principal  to  pay  thera  with.  National  Bank  v. 
Commonwealth  was  also  distinguished  in  Sumpter  Co.  v.  Nat.  Bank  of 
Gainesville,  62  Ala.  464,  where  it  was  held  that  the  levy  upon  the  stock 
of  the  bank  was  not  authorized  by  the  statute  of  that  State.  See  also 
Mechanics  Bank  v.  Baker  (N.  J.)  46  Atl.  586,  65  N.  J.  L.  113,  549. 


§  269      STATE  TAXATION  OF  NATIONAL  BANKS.        305 

the  tax  upon  the  shares  of  its  stockholders,  it  has  beea 
held  that  the  State  may  force  the  baak  to  pay  the  tax  by 
distraint  of  its  property. ^  The  distinction  however  between 
a  tax  upon  the  bank  as  the  statutory  agent  of  its  share- 
holders and  a  tax  upon  the  bank  property  as  such  must  be 
preserved,  as  the  former  tax  is  authorized  by  the  act  of 
Congress,  and  the  latter  is  not.  Thus  an  assessment  upon 
the  property  as  such,  or  against  the  bank  upon  the  stock 
in  solido,  is  invalid. ^  This  distinction  is  essential  for  the 
further  reason  that  in  States  where  deduction  of  debts  is 
allowed  in  the  assessment  of  "  other  moneved  capital,"  the 
national  bank  shareholder  is  entitled  to  a  deduction  of  his 
personal  indebtedness.^ 

Making  a  national  bank  the  accent  of  the  State  to  collect 
taxes  assessed  against  the  shares  of  the  bank  has  been  held 
by  the  Supreme  Court  to  be  a  mere  matter  of  procedure, 
and  there  is  no  discrimination  against  national  banks  where 
the  State  banks  are  not  thus  compelled  to  pay  taxes  for 
their  shareholders,  and  the  shareholders  are  looked  to 
directly  for  such  payment.  * 

1  First  National  Bank  of  Omaha  v.  Douglas  County,  3  Dillon  330.  It 
was  said  by  Judge  Dillon:  "Undoubtedly  the  bank  could  be  made  lia^^le 
to  pay  such  taxes  by  suit,  and  no  reason  is  seen  why  the  collection  may 
not  be  enforced  by  distraint  in  the  same  manner  as  other  taxes  are  col - 
lected." 

2  First  Nat.  Bank  of  Hannibal  v.  Merideth,44  Mo.  500;  City  of  Spring- 
field V.  First  Nat.  Bank,  87  Mo.  441,  where  it  was  held  that  the  refusal  of 
the  officers  of  the  baak  to  furnish  the  assessor  with  a  list  of  the  share- 
holders did  not  justify  him  in  making  the  assessment  and  enforcing  the 
tax  against  the  property  of  the  bank.  First  Nat.  Bk.  v.  Fancher,  48  N. 
Y.  524;  Nat.  Bank  of  Chemung  v.  Elmira,  53  N.  Y.  49;  First  Nat.  Bk.  v. 
Kichmond,  42  Fed.  K.  877;  Albuquerque  Nat.  Bk.  u.  Perea,  5  N.  Max. 
r.64;  1st  Nat.  Bk.  v.  Chehalis  Co.,  6  Wash.  64;  Millerv.  Merchants'  Nat. 
Bk.  (Ohio),  3  Nat.  Bk.  Cases  711. 

3  First  Nat.  Bank  of  Richmond  v.  City  of  Richmond,  39  Fed.  Rep. 
309. 

*  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461. 

20 


306  STATE  TAXATION  OF  NATIONAL  BANKS.  §   270 

§  270.  Place  of  taxation. 

The  Act  of  Congress  provides  that  the  legislature  of  each 
State  may  determine  the  manner  and  place  of  taxing  the 
shares,  subject  to  the  restriction  that  those  owned  by  non- 
residents of  the  State  shall  be  taxed  in  the  city  or  town 
where  the  bank  is  located  and  not  elsewhere.^  Where 
within  the  State  the  shares  shall  be  taxed  therefore,  whether 
in  the  town  or  city  where  the  bank  is  located  or  in  the  local- 
ity of  the  shareholder's  residence,  is  subject  to  the  deter- 
mination of  the  State. ^ 

The  shares  of  non-residents  of  the  State  however  are 
only  taxable  at  the  location  of  the  bank.  The  holder  of 
national  bank  shares  is  thus  protected  against  double  taxa- 
tion under  competing  State  authority,  for  such  shareholder 
cannot  be  taxed  at  his  domicil  on  shares  in  a  national  bank 
located  in  another  State. ^  The  Supreme  Court  of  Massa- 
chusetts said,  in  the  case  cited,  that,  "whatever  may  have 
been  the  design  or  motive,  we  can  have  no  doubt  that  it  is 
within  the  constitutional  power  of  Congress  to  establish  a 
national  bank  in  any  State  and  to  provide  that  its  shares 
shall  have  such  a  local  nature  as  to  be  exempt  from  taxation 
by  other  States ;  and  that  this  power  has  been  exercised  in 
the  present  instance." 

A  national  bank  has  under  the  law  but  one  location,  and 

1  The  act  of  1864  provided  for  including  the  shares  in  the  valuation  of 
personal  property  at  the  place  where  the  bank  was  located  and  not  else- 
where, and  there  was  a  conflict  of  judicial  opinion  as  to  whether  the 
word  "  place  "  meant  the  State  or  the  tovfn  where  the  bank  V7as  located. 
Opinion  of  Justices,  53  Me.  594:;  Austin  v.  Aldermen,  14  Allen  359; 
Markoe  v.  Hartranft,  6  Am.  Law  Reg.  487.  A  statute  of  Illinois  provid- 
ing for  the  taxation  of  shares  in  the  city  where  the  bank  was  located 
was  valid,  see  Tappan  v.  Merchants'  Nat.  Bank,  19  Wall.  490.  But  the 
court  did  not  decide  whether  the  State  could  provide  for  the  taxation  of 
shareholders  at  any  other  place  within  its  jurisdiction.  See  also  Austin 
V.  Aldermen,  7  Wall.  694;  Waite  v.  Dowley,  94  U.  S.  527. 

2  Buie  V.  Commissioners  of  Fayetteville,  79  N.  C.  267. 

3  Flint  V.  Board  of  Aldermen  of  Boston,  99  Mass.  141. 


§  271      STATE  TAXATION  OF  NATIONAL  BANKS.        307 

therefore  only  one  taxable  sifus  based  on  location.  Where 
the  bank  was  located  in  New  Jersey,  and,  for  the  conve- 
nience of  its  customers  in  Philadelphia,  maintained  a  clerk 
in  that  city  to  receive  deposits,  it  was  held  not  to  become 
subject  to  taxation  in  Philadelphia.^ 

Where  the  statute  of  a  State  directs,  as  it  lawfully  ma}'^, 
that  residents  of  the  State  owninsr  stock  in  national  banks 
located  in  the  State  shall  be  assessed  for  taxation  thereon  at 
their  respective  residences  in  the  State,  such  shares  must  be 
returned  for  taxation  like  other  personal  property,  and  they 
would  not  therefore   be  taxable  at  the  location  of  the  bank.^ 

§271.  Mauuerof  assessment. 

The  Act  of  Congress  provides  that  the  legislature  of  each 
State  may  determine  the  manner  as  well  as  the  place  of  tax- 
ation, subject  to  the  other  provisions  of  the  act.  Bank 
shares  are  therefore  taxable,  as  other  personal  property  of 
like  character  is  taxable  under  the  laws  of  the  State.  The 
property  and  also  the  surplus  funds  of  the  bank,  in  what- 
ever form  invested,  are  included  in  the  valuation  of  the 
shares.^  The  shares  are  to  be  valued  at  their  fair  cash 
value  on  the  assumption  that  the  bank  will  continue  its 
business,  and  not  at  what  they  would  be  worth  in  case  the 
bank  should  be  wound  up,  when  that  is  not  in  contempla- 
tion.* 

While  a  State  bank  is  changing  into  a  national  bank  and 
before  the  requirements  of  the  State  statute  are  fully  com- 
plied with,  it  is  subject  to  taxation.  ^     A  national   bank  is 

1  See  National  State  Bank  of  Camdea  v.  Pierce,  U.  S.  Circuit  Court  of 
Pennsylvania,  2  Nat.  Bank  Cases  177. 

2  See  Buie  v.  Commissioners  of  Fayetteville,  79  N.  C.  267;  also  Golds - 
bury  V.  "Warwick,  112  Mass.  384. 

3  First  National  Bank.  v.  Concord,  59  N.  H.  75. 

^  National  Bank  of  Commerce  v.  New  Bedford,  155  Mass.  313. 
*  Commonwealth  v.  Bank,  Penn.  Com.  Pleas,  2  Pearson  386. 


308  STATE  TAXATION  OF  NATIONAL  BANKS.  §   271 

not  taxable  on  increase  of  stock,  that  is,  the  new  shares  are 
not  taxable,  until  the  certificate  of  increase  is  issued  by  the 
comptroller. 1 

Shares  owned  by  a  national  bank  in  other  national  banks 
may  be  included  in  the  valuation  of  the  shares  of  the  bank.^ 
Thus  in  the  case  last  cited  the  court  said,  at  pa^e  70:  "  The 
manifest  intention  of  the  law  is  to  permit  the  State  in  which 
a  national  bank  is  located  to  tax,  subject  to  the  limitations 
prescribed,  all  the  shares  of  its  capital  stock  without  regard 
to  their  ownership.  The  proper  inference  is,  that  the  law 
permits  in  the  particular  instance  the  taxation  of  the  national 
banks  owning  shares  of  the  capital  stock  of  another  national 
bank  by  reason  of  that  ownership  on  the  same  footing  with 
all  other  shares." 

This  principle  has  been  applied  to  the  case  where  a  bank 
owns  certain  of  its  own  shares,  the  value  of  which  should 
be  divided  amono-  the  holders  of  the  remaining^  shares  in 
the  assessment  of  the  value  of  their  respective  interests.^ 
It  was  contended  in  a  Pennsylvania  case  that  national  bank 
shares  could  not  be  assessed  at  more  than  par,  because  other 
moneyed  capital,  that  is  mone}^  at  interest,  was  only  as- 
sessed at  par,  and  that  par  must  therefore  be  the  maximum 
of  taxable  value  of  bank  shares.  But  the  Supreme  Court 
held  this  position  untenable,  because  money  invested  in  a 
bank  is  not  money  put  out  at  interest,  and  the  par  value  of 
stock  does  not  necessarily  indicate  its  value.*  It  is  imma- 
terial that  the  bank's  property  or  surplus  may  be  invested 
in  property  itself  exempt  from  taxation,  see  infra,  §  27^. 
It  is  also  immaterial  that  the  bank  holds  stocks  of  other 
corporations  acquired  by  it  in  the  course  of  business, 
whether  such  corporations  are  located  in  and  taxed  by  the 

1  Charleston  v.  People's  Nat.  Bank,  5  S.  C.  103, 

2  Bank  of  Redemption  v.  Boston,  125  U.  S.  60. 

3  Button  V.  Citizens'  National  Bank,  53  Kansas  440. 
*  Hepburn  v.  School  Directors,  23  Wall.  480. 


§  272      STATE  TAXATION  OF  NATIONAL  BANKS.        309 

State  or  not.^  Deductions  are  not  allowed  on  that  account, 
unless  required  to  conform  to  similar  deductions  allowed  in 
the  case  of  other  moneyed  capital  in  the  State. 

§  272.   Real   estate  in  other    States    not  deducted   from 
value  of  shares. 

The  value  of  real  estate,  located  in  other  States  and  as- 
sessed for  taxation  there  under  their  laws,  is  not  required  to 
be  deducted  from  the  value  for  taxation  of  shares  of  na- 
tional banks.  This  was  decided  by  the  Supreme  Court  in  a 
recent  case  from  Utah, ^  where  the  refusal  of  the  assessors  to 
make  such  a  deduction  was  made  an  objection  to  the  validity 
of  the  tax.  The  court  said  that  the  State  of  domicil  is  entitled 
under  the  National  Banking  Law  to  collect  taxes  upon  the 
full  value  of  the  shares  of  stock,  and  to  permit  a  deduction 
for  the  real  estate  located  in  other  jurisdictions,  the  value  of 
which  necessarily  makes  part  of  the  value  of  the  stock,  would 
reduce  the  real  value  of  the  shares  for  taxation  without 
compensatory  equivalent.  The  language  of  a  Maryland 
case  was  adopted,  at  page  561,  as  expressing  the  true 
rule :  ^  — 

"  The  true  criterion,  as  fixed  by  the  statute,  is  the  true 
value  of  the  stock,  without  reference  to  the  question  Avhere, 
or  in  what  manner  or  nature  of  property  or  security,  the 
capital  stock  may  be  invested.  Whether  that  be  invested 
in  real  estate,  or  other  property  beyond  the  jurisdiction  of 
this  State,  the  latter  having  control  over  the  shares  and 
their  true  value,  the  peculiar  nature  and  value  of  the  in- 
vestment of  the  capital  stock  of  the  corporation,  beyond 
the  limits  of  the  State,  can  form  no  proper  subject  for 
specific  deduction  or  abatement  from  the  true  value  of  the 
shares  of  stock,  when  presented  to  be  assessed  for  pur- 

1  Pacific  National  Bank  of  Tacoraa  v.  Pierce  County,  20  Wash.  675. 

2  Commercial  Banlj  v.  Chambers,  182  U.  S.  556. 

3  American  Coal  Co.  v.  County  Commissioners,  59  Md.  185,  194. 


310        STATE  TAXATION  OF  NATIONAL  BANKS.      §  274 

poses  of  taxation.  It  is  exclusively  with  the  shares  of 
stock,  and  their  true  value,  as  representing  the  entire  cor- 
porate assets,  that  the  tax  commissioner  has  to  deal,  and 
not  with  the  nature  and  locality  of  the  investment  of  the 
capital  stock  of  the  corporation,  except  as  to  the  real 
estate  of  the  company  situate  within  this  State." 

§  273.  Territories  have  same  taxing"  power  as  States  over 
national  banks. 

It  was  contended  by  a  national  bank  of  Montana  Terri- 
tory that  Congress  had  only  given  consent  to  the  taxation 
of  stock  in  national  banks  by  the  States,  and  therefore  such 
stock  could  not  be  taxed  by  a  Territory.  But  the  court 
said  ^  that,  although  this  was  true  according  to  the  letter  of 
the  statute,  yet  the  word  "  State  "  in  this  section  must  be 
construed  in  connection  with  the  other  sections  of  the  act, 
and  that  it  was  clearly  used,  not  in  contradistinction  to 
"  Territory,"  but  in  its  general  popular  sense,  as  including 
both  the  District  of  Columbia  and  the  Territories. 

§  274.  Jifo  deduction  on  account  of  holding  United  States 
securities. 

It  was  decided  by  the  Supreme  Court,  reversing  the  New 
York  Court  of  Appeals,  soon  after  the  adoption  of  the 
National  Banking  Act  of  1864,  that  it  is  immaterial  that 
the  capital  of  a  national  bank  is  invested  in  obligations  of 
the  Federal  government,  which  are  expressly  exempted  by 
Congress  from  taxation  under  State  authority,  whether 
held  by  individuals  or  corporations. ^  The  tax  authorized 
by  Congress  is  therefore  not  upon  the  national  banks,  but 

1  Talbott  V.  Silver  Bow  County,  139  U.  S.  438. 

2  Vaa  Allen  v.  Assessors,  3  Wall.  573,  Chief  Justice  Chase  and  Justices 
Wayne  and  Swayne  dissenting,  claiming  that  Congress  did  not  intend  to 
subject  the  national  securities  even  by  indirection  to  State  taxation. 
See  also  Bradley  v.  People,  4  Wall.  459. 


§   275  STATE  TAXATION  OF  NATIONAL  BANKS.  311 

upon  the  interests  of  their  shareholders,  and  the  limited 
State  tax  authorized  is  one  of  the  burdens  annexed  to  the 
enjoyment  of  the  rights  and  privileges  conferred  upon 
national  banldng  associations.  This  ruling  has  been  uni- 
formly followed  since.  National  bank  shares  are  thus  tax- 
able by  State  authority  at  their  full  value  like  other  prop- 
erty, whether  the  whole  or  a  part  of  the  capital  of  the 
bank  is  invested  in  Federal  securities. 

§  275.  Discrimination  through  taxation  of  State  banks  on 
capital  or  property. 

As  national  securities,  whether  held  by  individuals  or 
corporations,  are  exempt  from  taxation  under  State  author- 
ity, it  follows  that  the  State  banks  when  taxed  upon  their 
property  or  capital  stock  can  claim  exemption  for  so  much 
of  their  property  or  capital  representing  their  property,  as 
is  invested  in  such  exempt  securities.  The  statute  of  New 
York  in  force  at  the  time  of  the  adoption  of  the  National 
Banking  Act  authorized  the  taxation  of  State  banks  upon 
their  capital  stock,  and  it  was  provided  that  the  tax  on  the 
shares  of  national  banks  should  not  exceed  their  par 
value.  But  the  Supreme  Court  held,  in  the  case  last  above 
cited,  all  the  judges  concurring,  that  this  taxation  of  State 
banks  upon  their  capital  stock  involved  a  discrimination 
against  the  national  banks.  The  court  said  at  page  581: 
♦'  Inasmuch  as  the  capital  of  the  State  banks  may  con- 
sist of  the  bonds  of  the  United  States  which  are  exempt 
from  State  taxation,  it  is  easy  to  see  that  this  tax  on  the 
capital  is  not  an  equivalent  for  a  tax  on  the  shares  of  the 
stockholders." 

This  ruling  was  made  prior  to  the  amendment  of  1868 
and  while  there  Avas  an  express  provision  in  the  Act  of  Con- 
gress against  discrimination  in  favor  of  State  banks;  but  this 
provision,  as  stated,  is  included  in  the  more  comprehensive 
provision   retained  in  the  amendment  of   1868    prohibiting 


312        STATE  TAXATION  OF  NATIONAL  BANKS.      §  276 

discrimination  in  favor  of  moneyed  capital  in  the  hands  of 
individual  citizens. 

§  276.  Other  moneyed  capital  is  other  taxable  moneyed 
capital. 

After  the  decision  in  Van  Allen  v.  Assessors,  supra ^ 
§  274,  the  New  York  statute  was  amended  so  as  to  provide 
that  no  tax  should  be  assessed  upon  the  capital  of  either 
State  or  national  banks,  but  that  the  stockholders  in  both 
should  be  charged  upon  the  value  of  their  shares,  though  not 
at  a  greater  rate  than  was  assessed  on  other  moneyed  capital 
in  the  hands  of  individual  citizens  in  the  State.  This  was 
also  claimed  to  be  invalid,  because  the  personal  property  of 
individuals  was  allowed  a  deduction  on  account  of  their 
holdings  of  United  States  securities,  and  therefore  there 
was  a  discrimination  in  their  favor  as  against  the  national 
banks.  The  court  held  ^  that  this  was  not  such  a  discrimi- 
nation as  was  contemplated  by  the  Act  of  Congress.  The 
true  construction  of  the  clause  of  the  Act  of  Congress  is 
that  the  rate  of  taxation  upon  the  shares  shall  be  the  same 
and  no  greater  than  that  upon  the  moneyed  capital  of  indi- 
vidual citizens  that  is  subject  to  taxation,  and  the  argument 
really  meant  that  Congress  should  have  repealed  the  exemp- 
tion of  securities  in  order  to  effect  equality  of  taxation. 

While  the  statute  of  1864  was  in  force,  it  was  claimed 
that  the  taxation  of  national  bank  shareholders  in  Missouri 
was  invalid,  for  the  reason  that  the  State  by  charters  granted 
under  the  former  constitution,  authorizing  exemptions  from 
taxation,  had  made  contracts  of  exemption  with  two  banks 
and  had  thus  disabled  itself  from  taxing  their  shareholders 
in  the  same  manner  as  those  of  national  banks  were  taxed. 

1  Vaa  Allen  u.  Commissioners,  4  Wall.  244.  See  also  Bradley  ».  People, 
4  Wall.  459,  applying  the  ruling  of  Van  Allen  v.  Commissioners  to  the  tax- 
ing laws  of  Illinois.  See  also  Exchange  Nat.  Banku.  Miller,  19  Fed.  Rep. 
372. 


§  277      STATE  TAXATION  OF  NATIONAL  BANKS.        313 

The  court  decided  ^  however  that  this  was  not  a  discrimina- 
tion within  the  meaning  and  intent  of  the  act,  and  that 
Congress  meant  no  more  than  to  require  of  each  State,  as 
a  condition  for  the  exercise  of  the  power  to  tax  the  shares 
of  national  banks,  that  it  should  tax  them  in  like  manner 
as  it  did  the  shares  of  banks  of  its  own  creation,  so  far  as 
it  had  the  capacity. 

The  same  principle  was  applied  in  Delaware, ^  where  the 
only  subjects  of  taxation  were  real  estate,  live  stock  and 
bank  shares.  The  court  held  that  the  words  "  otlier 
moneyed  capital  ' '  imply  that  national  bank  shares  are 
to  be  classed  as  monej^ed  capital ;  and,  as  national  banks 
were  subject,  under  the  Delaware  law,  to  a  tax  of  only  one- 
fourth  of  one  per  cent,  which  was  the  rate  imposed  upon 
each  share  of  the  actual  value  of  every  banking  institution 
of  Delaware,  there  was  no  ground  for  complaint. 

§  277.  Equality  of  taxation  Avith  other  moneyed  capital. 

The  National  Banking  Act,  as  amended  in  1868,  provides 
that  the  assessment  upon  the  shares  of  national  bank  stock 
shall  not  be  at  a  greater  rate  than  is  assessed  upon  other 
moneved  capital  in  the  hands  of  individual  citizens  of  a  State. 
Difference  in  the  rate  of  the  tax  levy  between  bank  shares 
and  other  moneyed  capital  would  be  too  obvious  a  discrim- 
ination for  question.^  But  there  have  been  a  number  of 
cases  of  allege'd discrimination  ao;ainst  national  banks  in  State 


1  Lioaberger  v.  Rowse,  9  Wall.  408,  affirming  Supreme  Court  of  Mis- 
souri. 

2  First  Nat.  Bank  of  Wilmington  v.  Herbert,  44  Fed.  Rep.  158. 

'  That  is,  an  actual  not  an  apparent  difference  in  rate,  see  Mercliants' 
^&  Manufacturers'  Bank  v.  Pennsylvania,  167  U.  S.  461.  It  was  held  in 
Providence  Institution  for  Savings  v.  Boston,  101  Mass.  575,  that  the  rate 
upon  bank  shares  need  not  be  as  low  as  the  lowest  rate  upon  moneyed 
capital  anywhere  in  the  State,  but  it  is  sufficient  if  the  rate  on  the  bank 
shares  is  the  same  as  the  rate  upon  moneyed  capital  In  the  hands  of  in- 
dividual citizens  in  the  town  or  city  where  the  bank  is  located. 


314        STATE  TAXATION  OF  NATIONAL  BANKS.       §  278 

taxation,  growing  out  of  the  peculiarities  inthe  different  tax- 
ino^  systems  of  the  States.  Thus  some  States  allow  deduc- 
tions of  debts  from  taxable  personal  property,  others  permit 
this  deduction  from  taxable  credits  only,  and  others  again 
allow  no  deduction  whatever.  In  some  States  the  sources  of 
municipal  and  St^te  revenues  have  been  separated,  and 
there  is  a  consequent  difference  in  the  method  of  taxation 
of  different  classes  of  property.  Also  the  States  differ 
much  in  the  matter  of  exemptions  from  taxation  allowed 
according  to  the  different  views  of  public  policy,  and  in 
the  methods  adopted  to  solve  the  difficult  problem  of  tax- 
ing the  different  classes  of  personal  property.  The  cases 
of  alleged  discrimination  against  national  banks  may 
therefore  be  grouped  iuto  the  following  classes : — 

First,  discriminations  through  exemption  of  other  prop- 
erty; second,  discriminations  through  deduction  of  debts 
from  the  valuation  of  other  property;  and  third,  discrimi- 
nations through  inequality  in  the  valuation  of  bank  shares 
as  compared  with  other  property. 

All  of  these  cases  of  alleged  discrimination,  particularly 
the  first  two  classes,  must  be  considered  in  the  light  of  the 
construction  given  by  the  Supreme  Court  to  the  words 
"  other  moneyed  capital  in  the  hands  of  individual  citi- 
zens. 

§  278.  Discriminations  througli   exemptions   from   taxa- 
tion. 

There  is  no  discrimination  against  national  bank  shares 
in  the  limited  exemption  of  property  held  for  charitable 
and  religious  uses,  allowed  by  the  States  from  considerations 
of  public  policy.^  Thus  it  was  said  by  the  court,  in  the 
case  cited,  that  it  was  not  intended,  by  the  Act  of  Congress 
governing  State  taxation  of  national  banks,  to  curtail  the 

1  Adams  w.  Nashville,  95  U.  S.  19. 


§    279  STATE  TAXATION  OF  NATIONAL  BANKS.  315 

taxing  power  of  the  State  or  prohibit  the  exemption  of  par- 
ticular classes  of  property,  which  the  legislature  might 
choose  to  exempt.  The  discretionary  power  of  the  State 
legislature  over  these  subjects  remains  as  it  was  before  the 
Act  of  Congress  was  passed,  for  the  plain  intention  of  the 
act  was  to  protect  the  corporations  formed  under  its  au- 
thority from  unfriendly  discrimination  by  the  States  in  the 
exercise  of  their  taxing  power. 

In  a  Pennsj'lvania  case,  this  principle  was  extended  to 
the  exemption  of  mortgages,  judgments,  recognizances  and 
money  owing  upon  articles  of  agreement  for  the  sale  of 
real  estate,  all  of  which  were  exempted  from  taxation  ex- 
cept for  State  purposes.  The  court  held  that  this  did  not 
constitute  a  discrimination,^  saying,  1.  c.  page  485 :  — 

"  This  is  a  partial  exemption  only.  It  was  evidently  in- 
tended to  prevent  a  double  burden  b}^  the  taxation  both  of 
property  and  debts  secured  upon  it.  Necessarily  there 
may  be  other  moneyed  capital  in  the  locality  than  such  as 
is  exempt.  If  there  is,  moneyed  capital  as  such  is  not  ex- 
empt. Some  part  of  it  only  is.  It  could  not  have  been  the 
intention  of  Congress  to  exempt  bank  shares  from  taxation 
because  some  moneyed  capital  was  exempt." 

§  279.  Allegations   of  discriminating   exemption  held   to 
require  ansvt^er. 

But  in  a  later  case  from  Pennsylvania, ^  the  allegations  of 
the  plaintiff  in  his  petition  were  held  to  constitute  a  suffi- 
cient charge  of  discrimination  to  require  an  answer  from  the 
defendants.  The  Supreme  Court  reversed  the  judgment 
of  the  State  court  which  had  sustained  a  demurrer  to  the 
petition,  following  the  decision  in  Adams  v.  Nashville. 
This  petition  charged  that  a  very  large  amount  of  property 

1  Hepburn  v.  School  Directors,  23  Wall.  480. 

2  Boyer  v.  Boyer,  113  U.  S.  689. 


316        STATE  TAXATION  OF  NATIONAL  BANKS.       §  279 

in  Pennsylvania  had  been  relieved  from  the  burden  of 
county  taxation,  including  all  bonds  or  certificates  of  loans 
issued  by  any  railroad  company,  shares  of  stock  in  the 
hands  of  stockholders  of  an}^  institution  or  company  of  the 
State,  mortgages,  judgments  and  moneys  due  or  owing 
upon  articles  of  agreement  for  the  sale  of  real  estate  and 
loans  made  by  corporations,  all  of  which  were  taxable  for 
State  purposes  only. 

The  court  said  that,  as  the  Act  of  Congress  does  not  fix 
a  definite  limit  as  to  percentage  of  value,  beyond  which  the 
States  may  not  tax  national  bank  shares,  cases  will  arise 
in  which  it  will  be  difficult  to  determine  whether  the  exemp- 
tion of  any  particular  part  of  the  moneyed  capital  in  indi- 
vidual hands  is  so  serious  or  material  as  to  infringe  the 
rule  of  substantial  equality. 

Counsel  urged  that  the  State  had  exempted  the  railroad 
and  other  securities  in  question  from  local  taxation,  because 
it  derived  its  princip  al  revenue  from  railroads  and  corpora- 
tions, and  therefore  conserved  its  own  interests  in  protect- 
ing such  securities.  But  the  court  replied  that  it  was  not 
concerned  with  the  motives  of  public  policy  which  influ- 
enced the  Commonwealth,  and  that  its  sole  function  was 
to  construe  the  legislation  of  Congress  permitting  the  sev- 
eral States  to  tax  national  bank  shares.  If  the  principal  of 
substantial  equality  required  in  State  taxation  of  such 
shares  and  other  moneyed  capital  operates  to  disturb  the 
peculiar  policy  of  any  State,  the  remedy  is  with  Congress. 

The  court  said,  with  reference  to  the  Hepburn  case,  supra, 
§  278,  that,  while  this  is  an  authority  for  the  proposition 
that  a  partial  exemption  by  a  State  of  moneyed  capital  for 
local  purposes  does  not,  of  itself  and  without  reference  to 
the  aggregate  moneyed  capital  not  so  exempt,  establish  the 
right  to  the  same  exemption  in  favor  of  national  bank 
shares,  yet  it  is  by  no  means  authority  for  the  broad 
proposition  that  national  bank  shares  can  be  subjected  to 


§  281  STATE  TAXATION  OF  NATIONAL  BANKS.  317 

local  taxation  where  a  very  material  part,  relatively,  of 
other  moneyed  capital  in  the  hands  of  individual  citizens 
within  the  same  jurisdiction  or  taxing  district  is  exempt  from 
such  taxation.  It  laid  down  the  following  rules  deduced 
from  the  preceding  cases,  page  695 :  — 

§  280.  Rules  of  Supreme  Court  as  to  discrimination. 

"1.  That  the  words  'at  a  greater  rate  than  is  assesserl 
upon  other  moneyed  capital  in  the  hands  of  individual  citi- 
zens '  refer  to  the  entire  process  of  assessment,  which,  in 
the  case  of  national  bank  shares,  includes  both  their  valua- 
tion and  the  rate  of  percentage  on  such  valuation ;  conse- 
quently, that  the  Act  of  Congress  is  violated  if,  in  connec- 
tion with  a  fixed  percentage  applicable  to  the  valuation 
alike  of  national  bank  shares  and  of  other  monej^ed  invest- 
ments or  capital,  the  State  law  establishes  or  permits  a 
mode  of  assessment  by  which  such  shares  are  valued  higher 
In  proportion  to  their  real  value  than  is  other  moneyed 
capital. 

"2.  That  a  State  law  which  permits  individual  citizens 
to  deduct  their  just  debts  from  the  valuation  of  their  per- 
sonal property  of  every  kind,  other  than  national  bank 
shares,  or  which  permits  the  taxpayer  to  deduct  from  the 
sum  of  his  credits,  money  at  interest  or  other  demands  to 
the  extent  of  his  bona  fide  indebtedness,  leaving  the  re- 
mainder to  be  taxed,  while  it  denies  the  same  right  of  de- 
duction from  the  cash  value  of  bank  shares,  operates  to  tax 
the  latter  at  a  greater  rate    than  other  moneyed  capital."  ^ 

§  281.   Discriminating  exemptions  must  be  of  competing 
moneyed  capital. 

This  decision    however,    as  will  be  seen,  was  rendered 

^  See  Pollard  v.  The  State,  65  Ala.  628,  overruling  Mclver  v.  Robin- 
son, 53  Ala.  456. 


318        STATE  TAXATION  OF  NATIONAL  BANKS.       §  282 

with  reference  to  the  sufficiency  of  the  allegations  in  the 
complaint,  and  must  be  considered  in  the  light  of  the  more 
restricted  meaning  of  the  term  "  other  moneyed  capital  " 
adopted  by  the  court  in  later  decisions.  Thus  in  a  case 
from  Montana  the  Supreme  Court  held  ^  that  the  exemption 
of  the  stock  of  mining  corporations  does  not  constitute  a 
'  discrimination,  saying  that  the  restriction  imposed  in  the 
act  requires  equality  of  assessment  with  other  moneyed 
capital,  —  not  with  other  property  generally,  but  with  that 
property  which  passes  under  the  description  of  moneyed 
capital,  citing  Mercantile  National  Bank  v.  New  York, 
infra,  §  282. 

§  282.  Meaning  of  "other  moneyed  capital." 

The  leading  authority  on  the  subject  of  the  definition  of 
moneyed  capital  adopted  by  the  Supreme  Court  is  found  in 
the  New  York  National  Bank  Case.^  Discriminations  were 
claimed,  in  view  of  the  decision  of  the  court  in  Boyer  r. 
Boyer,  supra,  §  279,  and  were  based  upon  the  provisions  of 
the  New  York  statute  exempting  certain  classes  of  personal 
property,  which,  it  was  claimed,  constituted  a  very  material 
part  of  all  the  moneyed  capital  in  the  hands  of  individuals. 
The  court,  in  this  case,  after  reviewing  the  decisions,  de- 
fined the  meaning  of  the  words  ' '  other  moneyed  capital ' ' 
as  used  in  the  statute,  as  follows,  page  155  :  — 

"  Of  course  it  includes  shares  in  national  banks ;  the  use 
of  the  word  '  other  '  requires  that.  If  bank  shares  were 
not  moneyed  capital,  the  word  '  other  '  in  this  connection 
would  be  without  significance.  But  '  moneyed  capital ' 
does  not  mean  all  capital,  the  value  of  which  is  measured 
in  terms  of  money.      In  this  sense,  all  kinds  of  real  and 

1  Talbott  V.  Silver  Bow  County,  139  U.  S.  438. 

2  Mercantile  National  Banls  u.  New  York,  121  U.  S.  138,  affirming  28 
Fed.  Kep.  776. 


§  282      STATE  TAXATION  OF  NATIONAL  BANKS.        319 

personal  property  would  be  embraced  by  it,  for  they  all 
have  an  estimated  value  as  the  subjects  of  sale.  Neither 
does  it  necessarily  include  all  forms  of  investment  in  which 
the  interest  of  the  owner  is  expressed  in  money.  Shares 
of  stock  in  railroad  companies,  mining  companies,  manu- 
facturing companies,  and  other  corporations,  are  repre- 
sented by  certificates  showing  that  the  owner  is  entitled  to 
an  interest,  expressed  in  money  vahie,  in  the  entire  capital 
and  property  of  the  corporation,  but  the  property  of  the 
corporation  which  constitutes  its  invested  capital  may 
consist  mainly  of  real  and  personal  property,  which,  in 
the  hands  of  individuals,  no  one  would  think  of  calling 
moneyed  capital,  and  its  business  may  not  consist  in  any 
kind  of  dealing  in  money,  or  commercial  representatives 
of  money."     *     *     * 

"  The  terms  of  the  Act  of  Congress,  therefore,  include 
shares  of  stock  or  other  interests  owned  by  individuals  in 
all  enterprises,  in  which  the  capital  employed  in  carrying  on 
its  business  is  money,  where  the  object  of  the  business  is 
the  making  of  profit  by  its  use  as  money.  The  moneyed 
capital  thus  employed  is  invested  for  that  purpose  in  securi- 
ties by  way  of  loan,  discount,  or  otherwise,  which  are  from 
time  to  time,  according  to  the  rules  of  the  business,  reduced 
again  to  money  and  reinvested.  It  includes  money  in  the 
hands  of  individuals  employed  in  a  similar  way,  invested  in 
loans  or  in  securities  for  the  paj^ment  of  money,  either  as 
an  investment  of  a  permanent  character,  or  temporarily 
with  a  view  to  sale  or  repayment  and  reinvestment.  In  this 
way  the  moneyed  capital  in  the  hands  of  individuals  is  dis- 
tinguished from  what  is  known  generally  as  personal  prop- 
erty." i 

This  meaning  of  "  other  moneyed  capital,  "which  restricts 

1  As  to  "  competing  moneyed  capital  "  see  also  McMahou  v.  Palmer, 
102  N.  Y.  176;  Mercantile  National  Bank  v.  Shields,  5D  Fed.  Rep.  952; 
Nat.  Bank  of  Baltimore  v.  Baltimore,  92  Fed.  Rep.  239. 


320        STATE  TAXATION  OF  NATIONAL  BANKS.      §  283 

it  to  capital  competing  with  national  banks,  has  been 
reaflSrmed  in  several  cases. ^  Thus,  in  National  Bank  of 
Wellington  v.  Chapman,  the  court  said  that  the  main  pur- 
pose of  Congress  in  fixing  limits  to  State  taxation  on  invest- 
ments in  national  banks  was  "to  render  it  impossible  for  the 
State  in  levying  such  a  tax  to  create  and  fix  an  unequal  and 
unfriendly  competition  by  favoring  institutions  or  individuals 
carrying  on  a  similar  business  "  and  investments  of  a  like 
character.  The  language  of  the  Act  of  Congress  is  to  be 
read  in  the  light  of  this  policy.  After  quoting  from  the 
opinion  in  Mercantile  National  Bank  v.  New  York,  supra, 
the  court  said,  page  214 :  "  The  result  seems  to  be  that  the 
term  '  moneyed  capital '  as  used  in  the  Federal  statute  does 
not  include  capital  which  does  not  come  into  competition 
with  the  business  of  national  banks,  and  that  exemptions 
from  taxation,  however  large,  such  as  deposits  in  savings 
banks  or  moneys  belonging  to  charitable  institutions,  which 
are  exempted  for  reasons  of  public  policy,  and  not  as  an 
unfriendly  discrimination  as  against  investments  in  national 
bank  shares,  cannot  be  regarded  as  forbidden  by  the  Fed- 
eral statute." 

§  283.  No  discrimination  in  Xew  York  taxation  of  rail- 
road, business,  mining  or  insurance  companies. 

Under  the  definition  of  moneyed  capital  quoted  above,  it 
was  held  by  the  Supreme  Court  ^  that  there  was  no  dis- 
crimination agamst  national  banks  in  the  tax  system  of 
New  York,  on  account  of  the  exemption  of  the  shares  of 
either  railroad,   business,  insurance  or  mining  companies. 


1  National  Bank  of  Garnett  v.  Ayers,  160  U.  S.  660;  Talbott  v.  Silver 
Bow  County,  139  U.  S.  438;  First  Nat,  Bank  v.  Chapman,  173  U.  S.  205; 
Aberdeen  Bank  v.  Chehalis  County,  166  U.  S.  440,  Bank  of  Commerce  v. 
Seattle,  166  U.  S.  463;  Commercial  Bank  v.  Chambers,  182  U.  S.  556; 
Lander  v.  Mercantile  Nat.  Bank,  22  Sup.  Ct.  Rep.  908. 

2  Mercantile  Bank  v.  New  York,  121  U.  S.  138. 


§  284      STATE  TAXATION  OF  NATIONAL  BANKS.         321 

The  court  said  that,  as  to  such  corporations,  so  far  as  the 
policy  of  the  government  "U-ith  reference  to  national 
banks  is  concerned,  it  is  indifferent  how  the  States  choose 
to  tax  them,  or  whether  they  are  taxed  at  all,  and  contin- 
ued at  page  156  :  "  Whether  property  interests  in  railroads, 
in  manufacturing  enterprises,  in  mining  investments  and 
others  of  that  description  are  taxed  or  exempt  from  taxa- 
tion, in  the  contemplation  of  the  law,  would  have  no  effect 
upon  the  success  of  national  banks." 

It  had  been  held  in  People  v.  Commissioners,  s^pra, 
§  119,  that  there  was  no  discrimination  against  national 
banks  in  the  fact  of  an  allowance  to  insui-ance  companies 
of  a  deduction  for  their  holdings  in  national  securities,  as 
such  companies  are  not  in  the  words  or  contemplation  of 
the  Act  of  Congress.     This  ruling  was  reaffirmed. 

§  284.  No  discrimination  in  New  York  taxation  of  trust 
companies. 

Trust  companies  under  the  New  York  statute  were  taxa- 
ble at  that  time  for  local  purposes  upon  the  actual  value  of 
their  capital  stock,  but  were  subject  to  a  franchise  tax,  in 
the  nature  of  an  income  tax,  payable  to  the  State.  It  was 
uro'ed  in  the  case  last  cited  that  this  was  a  discrimination  in 
their  favor  as  against  the  banks,  including  national 
banks. 

The  court,  after  enumerating  the  powers  of  tmst  com- 
panies under  the  law  of  New  York,  said  that  they  were 
not  banks  in  the  commercial  sense  of  that  word,  and  did 
not  perform  the  functions  of  banks  in  canying  on  the  ex- 
chanoes  of  commerce.  It  admitted  however  that  receiv- 
ing  money  on  deposit  and  investing  in  loans  and  deal- 
ing in  money  and  securities  did  properly  bring  the  shares 
of  stock  of  their  shareholders  within  the  definition  of 
moneyed  capital  as  used  in  the  Act  of  Congress.  But  the 
court  found  that,  under  the  method  of  taxation  adopted 

21 


322        STATE  TAXATION  OF  NATIONAL  BANKS.       §  285 

by  the  State  of  New  York,  there  was  no  substantial  dis- 
crimination, as  trust  companies  paid  tlie  State  franchise  tax 
in  addition  to  that  for  local  purposes  on  their  capital.^ 

§  285.  Nor  in  exemption  of  deposits  in  savings  banks, 
bnilding  and  loan  associations  or  stock  in  for- 
eign corporations. 

The  deposits  in  Savings  Banks  in  New  York,  amounting 
to  $437,107,501,  with  an  accumulated  surplus  of  $69,669,- 
000,  were  admitted  by  the  court  ^  to  be  "moneyed  capital." 
But  it  was  said  to  be  equally  clear  that  such  institutions  are 
not  within  the  meaning  of  the  Act  of  Congress,  because  no 
one  could  suppose  for  a  moment  that  savings  banks  come 
into  business  competition  with  the  national  banks  of  the 
United  States.  Their  exemption  was  therefore  in  accord- 
ance with  wise  public  policy,  and  could  not  operate  as  an 
unfriendly  discrimination  against  investments  in- national 
bank  shares.  It  is  immaterial  that  savings  banks  are  per- 
mitted to  transact  a  banking  business  in  the  way  of  loans 
upon  personal  securities.  They  are  substantially  institu- 
tions organized  in  pursuance  of  a  great  and  beneficial  public 
policy,  for  the  purpose  of  investing  the  savings  of  small 
depositors.^ 

1  In  a  recent  case,  Jenkins  v.  Nefif,  22  Sup.  Ct.  Rep.  905,  affirming  163 
N.  y.  320,  the  court  reaffirmed  this  ruling  as  to  trust  companies.  It  was 
urged  that  trust  companies  by  recent  legislation  of  New  York,  had  been 
placed  on  an  equality  with  banks,  and  that  they  were  practically  doing  a 
banking  business  competing  with  national  banks.  But  the  court  said 
that  there  was  no  change  in  the  legislation  of  New  York  which  called  for 
any  limitationof  the  decision  in  the  Mercantile  National  Bank  Case.  It  was 
to  be  presumed  that  if  the  trust  or  other  companies  were  exercising 
powers  not  authorized  by  the  law,  the  State  would  take  the  proper  steps  to 
keep  them  witiiin  their  statutory  limits,  and  any  neglect  in  a  limited  time 
to  do  so  could  not  be  construed  as  an  assent  by  the  State  to  such  an  im- 
proper assumption  of  power. 

2  Mercantile  Bank  «.  New  York,  121  U.  S.  160. 

3  Bank  of  Redemption  v.  Boston,  125  U.  S.  68;  Davenport  Bank  v. 
Davenport  Board  of  Equalization,  123  U.  S.  83. 


§  286      STATE  TAXATION  OF  NATIONAL  BANKS.        323 

The  same  principle  was  extended  to  Building  and  Loan 
Associations,  and  it  was  held  that  the  exemption  of  their 
funds  from  taxation  does  not  constitute  a  discrimination.! 

The  exemption  of  municipal  bonds  of  New  York  amount- 
ing to  $13,467,000  was  held  in  the  same  case  to  involve 
no  discrimination.  Such  securities  undoubtedly  represent 
moneyed  capital,  but  as  from  their  nature  they  are  not 
ordinarily  subject  to  taxation,  they  are  not  within  the  rule 
established  by  Congress. 

The  court  decided  further  that  the  exemption  of  stocks, 
owned  by  citizens  of  New  York  in  corporations  created  by 
other  States  and  amounting  to  at  least  $250,000,000, 
constituted  no  discrimination.  It  had  been  decided  by  the 
courts  of  New  York  that  they  were  not  subject  to  taxation, 
as  they  had  no  situs  within  the  territory  of  that  State  for 
that  purpose.^ 

§  286.  Discrimination  through  deduction  of  debts  from 
"other  moneyed  capital." 

The  decisions  of  the  Supreme  Court,  with  reference  to 
discrimination  through  the  allowance  of  deduction  of  debts 
from  personal  property,  must  be  considered  in  the  light  of 
the  definition  of  other  moneyed  capital  first  announced  in  the 
Mercantile  Bank  case,  supra,  §  282.  Under  that  definition, 
where  the  right  of  deduction  is  given  to  all  personal  property, 
including  "  other  moneyed  capital,"  or  to  such  class  of 
personal  property  as  includes  other  moneyed  capital  com- 
peting with  national  banks,  the  same  right  of  deduction 
must  be  given  to  shareholders  in  national  banks.  Thus  the 
State  of  New  York  by  its  taxing  policy  allowed  a  deduction 

1  Mercantile  National  Bank  af  Cleveland  v.  Hubbard,  98  Fed.  R.  465. 

2  The  same  ruling  was  applied  to  the  taxing  laws  of  New  Jersey, 
which  did  not  differ  naaterially  from  the  laws  of  New  York,  Newark 
Banking  Co.  v.  Newark,  121  U.  S.  163. 


324        STATE  TAXATION  OF  NATIONAL  BANKS.      §  286 

of  just  debts  from  the  valuation  of  all  personal  property, 
excepting  so  much  thereof  as  consisted  of  shares  of  stock 
in  corporations.  The  Supreme  Court  held  that  this  statute, 
as  constnied  by  the  New  York  Court  of  Appeals,  was  a 
discrimination  against  the  national  bank  shares  in  violation  of 
the  Act  of  Congress,  for  the  owners  of  these  shares  could  not 
diminish  the  amount  of  their  tax  by  the  amount.of  their  debts 
as  could  the  owners  of  "other  moneyed  capital."^  The 
statute  under  which  the  assessment  was  made  however  was 
not  rendered  void  by  this  discrimination,  nor  was  the  assess- 
ment made  thereunder  void,  but  was  entirely  valid  if  the 
stockholder  had  no  debts  to  deduct.  If  he  had  debts,  the 
assessment  excluding  them  from  computation  was  voidable, 
but  the  assessing  officers  acted  within  their  authority  in 
assessing  him  without  deduction,  until  they  were  duly  noti- 
fied that  he  had  debts. ^ 

A  national  bank  can  maintain  suit  on  behalf  of  its  stock- 
holders to  enjoin  the  collection  of  a  tax  unlawfully  assessed 
because  of  the  failure  to  allow  for  the  deduction  of  debts.' 
The  court  in  the  case  cited  permitted  an  amendment  to  the 
pleadings  to  allow  each  stockholder  to  show  the  amount  of 
the  deduction  to  which  he  was  entitled.* 

The  statute  of  Indiana,  allowing  the  taxpayer  to  deduct 
from  the  sum  of  his  credits,  money  at  interest  and  demands 
against  persons  or  corporations  the  amount  of  his  bona  fide 


1  People  V.  Weaver,  100  U.  S.  539.  See  opinion  of  New  York  Court 
of  Appeals  in  People  v.  Dolan,  36  N.  Y.  59;  McHenry  v.  Downer,  116 
Cal.  20,  45  L.  R.  A.  737  (annotated).  People  ex  rel.  v.  Ryan,'88  N.  Y. 
142,  holds  that,  where  debts  are  allowed  to  be  deducted  from  the  value  of 
the  shares,  a  debt  upon  a  note  for  borrowed  money  which  was  invested 
in  government  bonds  should  be  deducted,  although  the  transaction  was 
a  mere  device  to  escape  taxation. 

2  Supervisors  v.  Stanley,  105  U.  S.  305. 

3  Hills  V.  Exchange  Bank,  105  U.  S.  319. 

*  As  to  procedure  in  matter  of  claiming  deduction,  see  Stanley  v.  Su- 
pervisors of  Albany,  121  U.  S.  535. 


§  287      STATE  TAXATIOX  OF  NATIONAL  BANKS.        325 

indebtedness,  but  not  permitting  deduction  from  any  other 
kind  of  moneyed  capital,  was  also  held  to  be  a  discrimina- 
tion against  national  banks. ^  Counsel  claimed  that  the 
statute  of  Indiana  differed  from  the  New  York  statute. 
But  the  court  said  that  "  credits,  money  loaned  at  interest 
and  demands  against  persons  or  corporations  are  more 
purely  representative  of  moneyed  capital  than  personal 
property  so  far  as  they  can  be  said  to  differ,"  and  that  the 
"  rights,  credits,  demands  and  money  at  interest  mentioned 
in  the  Indiana  statute  "  meant  "  moneyed  capital  invested  in 
that  wa}^"  An  injunction  was  therefore  allowed  against 
the  enforcement  of  the  tax  as  to  those  shareholders,  who 
proved  that  they  were  entitled  to  deductions  for  debts. 

§  287.  No  discrimination  in  deduction  of  debts  from  non- 
competing  capital. 

The  restriction  of  the  meaning  of  "moneyed  capital" 
is  illustrated  in  the  rulings  of  the  court  with  reference  to 
the  taxing  system  of  Ohio.  Thus  it  was  held^  that  share- 
holders in  national  banks  of  Ohio  were  entitled  to  a  de- 
duction of  their  bona  fide  indebtedness  under  the  provisions 
of  the  Ohio  statute  allowing  such  deductions  from  credits. 
The   attention  of   the  court  in  this   case  does  not    seem  to 


1  Evansville  Bank  v.  Britton,  105  U.  S.  322. 

Chief  Justice  Waite  and  Justice  Gray  dissented  on  the  ground  that 
they  did  not  think  it  was  the  intention  of  Congress  to  require  a  deduc- 
tion for  debts  from  the  value  of  shares,  when  such  deduction  was  only 
allowed  to  other  persons  from  this  one  kind  of  moneyed  capital.  But 
Justice  Bradley  dissented  for  the  reason  that  in  his  opinion  the  law  was 
void  in  toto  as  to  national  banks;  that  the  probability  was  that  not  one 
in  ten  of  the  shareholders  would  ever  have  notice  of  the  assessment 
in  time  to  claim  deduction  for  debts,  and  one  who  had  notice  would 
naturally  be  reluctant  to  make  known  the  amount  of  his  debts  before  a 
board  of  bank  ofScers.  The  law  as  thus  construed  would  act  as  a  pro- 
hibition against  the  purchase  of  stock  by  those  who  owed  debts,  and  they 
constitute  a  considerable  portion  of  every  community. 

2  Whitbeck  v.  Mercantile  Bankj  127  U.  S.  193. 


326        STATE  TAXATION  OF  NATIONAL  BANKS.       §  287 

have  been  called  to  the  specific  definition  in  the  Ohio  statute 
of  the  "  credits  "  from  which  deductions  were  allowed. 

But  in  a  later  case  ^  the  court  said  that  the  sj'stem  of 
taxation  adopted  in  Ohio  was  not  intended  to  be  unfriendly 
or  discriminative  against  the  owners  of  shares  in  national 
banks,  for  tlie  system  was  adopted  by  the  State  prior  to 
the  passage  of  the  Act  of  Congress,  and  the  shares  in 
national  banks  were  taxed  precisely  like  the  shares  in 
State  banks. 

The  discrimination  was  not  illegal,  unless  it  was  shown 
clearly  to  be  in  favor  of  moneyed  capital  other  than  that 
employed  in  State  or  national  banks.  The  term  "  credits" 
as  defined  in  the  Ohio  statute  included  many  subjects 
which  had  no  possible  relation  to  the  business  of  national 
banks.  It  therefore  devolved  upon  the  shareholders  who 
complained  of  discrimination  to  show  how  much  moneyed 

1  National  Bank  of  Wellington  v.  Chapman,  173  U.  S.  205.  The  term 
''credits"  from  which  deduction  for  debts  is  allowed  in  the  Ohio 
statute  is  thus  defined  in  the  statute  (  see  p.  209  )  : — 

"  The  term  'credits'  means  the  excess  of  the  sum  of  alllegal  claims 
and  demands,  whether  for  money  or  other  valuable  thing,  or  for  labor  or 
service  due  or  to  become  due  to  the  person  liable  to  pay  the  tax  thereon, 
including  deposits  in  banks,  or  with  persons  in  or  out  of  the  State, 
other  than  such  as  are  held  to  be  money  as  defined  in  this  section,  when 
added  together  (estimating  every  such  claim  or  demand  at  its  true 
value  in  money),  over  and  above  the  sum  of  legal  bona  fide  debts  owing 
by  such  person;  but  in  making  up  the  sum  of  such  debts  owing,  no 
obligation  can  be  taken  into  account:  (1)  to  any  mutual  insurance 
company  ;  (2)  for  any  unpaid  subscription  to  the  capital  stock  of  any 
joint-stock  company  ;  (3)  for  any  subscription  for  any  religious,  scien- 
tific or  charitable  purpose  ;  (4)  for  any  indebtedness  acknowledged 
unless  founded  upon  some  consideration  actually  received  and  believed 
at  the  time  of  making  the  acknowledgment  to  be  a  full  consideration 
therefor  ;  (5)  for  any  acknowledgment  made  for  the  purpose  of  diminish- 
ing the  amount  of  credits  to  be  listed  for  taxation;  (6)  for  any  greater 
amount  or  portion  of  any  liability  as  surety  than  the  person  required  to 
make  the  statement  of  such  credits  believes  that  such  surety  is  in  equity 
bound  to  pay,  etc." 

The  court  refused  to  consider  the  report  of  the  auditor  of  the  State 
showing  that  the  total  credits,  after  deducting  debts  allowed,  amounted  to 


§  288      STATE  TAXATION  OF  NATIONAL  BANKS.        327 

capital  there  was  included  in  the  credit^  from  which  deduc- 
tions were  allowed,  and  the  record  afforded  no  means  of 
ascertaining  that  fact.  The  court  said  that  the  case  of 
Whitbeckf.  Mercantile  National  Bank  of  Cleveland,  mpra, 
was  not  an  authority  adverse  to  this  principle,  as  the  atten- 
tion of  the  court  in  that  case  was  not  called  to  the  peculiar 
terms  of  the  Ohio  statute. ^ 

Under  this  decision  it  is  not  sufficient  that  the  credits 
from  which  deduction  is  allowed  include  .some  moneyed 
capital.  There  must  be  some  evidence  from  which  the 
court  can  determine  how  much  moneyed  capital  is  in  fact 
included,  in  order  to  decide  whether  or  not  there  is  a  sub- 
stantial discriniiu;ttioii. 

§  288.  Xo  discrimiuation  iii  deduction  of  debts  of  unin- 
corporated banks. 

It  was  held  in  this  same  case  that  the  deduction  of  debts 
existint'  in  the  bu.-iness  frrmi  the  amount  of  n)oneyed  cap- 
ital belonging  to  a  banker  or  unincorporated  State  bank  is 
necessary  for  the  detennination  of  the  real  value  of  the 
capital  that  is  employed  in  the  business,  and  is  equivalent 
in  its  results  to  the  system  employed  in  the  case  of  incor- 
porated State  banks  and  national  banks.  As  long  as  the 
deduction  is  allowed  to  the  debts  existing  in  the  business 
only  and  not  to  general  debts  disconnected  with  the  busi- 
ness, there  is  no  discrimination.  The  court  said,  at  page 
216:  — 

"  Thus  in  both  incorporated  and  unincorporated  banks 
the  same  thing  is  desired,  and  the  same  result  of  assess- 

$106,000,000  to  8111,000,000,  the  amoaats  differiug  to  that  extent  as 
presented  by  counsel,  as  there  was  nothing  to  show  that  the  report  had 
been  received  in  evidence  or  that  there  was  any  finding  on  the  subject. 
1  For  recent  decisions  involving  the  Ohio  law,  see  Lander  v.  Mercan- 
tile Nat.  Bank  of  Cleveland,  22  Sup.  Ct.  Rep.  908,  reversing  45  C.  C.  A. 
66C,  and  Cleveland  Trust  Co.  v.  Lander,  62  Ohio  St.  266. 


328  STATE  TAXATIOlf  OF  NATIONAL  BANKS.  §289 

ing  the  value  of  the  capital  employed  in  the  business,^ 
after  the  deduction  of  the  debts  incurred  in  its  con- 
duct, is  arrived  at  in  each  case  as  nearly  as  is  possi- 
ble, considering  the  difference  in  manner  in  which  the  mon- 
eyed capital  is  represented  in  unincorporated  banks  as 
compared  with  incorporated  banks  which  have  a  capital 
stock  divided  into  shares.  That  mathematical  equality  is 
not  arrived  at  in  the  process  is  immaterial.  It  cannot  be 
reached  in  any  system  of  taxation,  and  it  is  useless  and 
idle  to  attempt  it.  Equality,  so  far  as  the  differing  facts 
will  permit,  and  as  near  as  they  will  permit,  is  all  that 
can  be  aimed  at  or  reached.  That  measure  of  equality  we 
think  is  reached  under  this  system.  So  far  as  this  point 
is  concerned,  it  is  entirely  plain  there  is  no  discrimination 
between  unincorporated  banks  and  bankers  on  the  one 
hand  and  holders  of  shares  in  national  banks  on  the 
other.  "1 

§  289.  Discriniination  tlirougli    failure   to    assess    other 
moneyed  capital. 

Efforts  to  resist  payment  of  taxes  upon  national  bank 
shares,  on  account  of  the  common  failure  of  taxing  authori- 

1  The  Supreme  Court  of  Nebraski  reached  the  same  conclusion  in 
Brassier  v.  Wayne  County,  32  Neb".  834,  and  13  L.  R.  A.  614,  in  1891, 
where  the  court  construed  and  applied  the  decision  of  the  United  States 
Supreme  Court  in  Mercantile  National  Bank  u.  New  York,  121  U.  S 
138,  overruling  the  opinion  previously  reported  in  the  same  case,  25 
Neb.  468.  The  court  held  that  the  terra  "  credits  ",  as  used  in  the  Ne- 
braska statute,  from  which  deduction  of  debts  was  allowed  was  not  in- 
tended to  include  any  moneyed  capital,  such  as  notes  or  other  credits  of 
that  character.  See  also  1st  Nat.  Bk.  v.  Turner,  154  Ind.  456,  making  the 
same  ruling  as  to  the  statute  of  Indiana;  afid  in  Virginia,  Burroughs 
V.  Smith,  95  Va.  694,  and  People's  Nat.  Bk.  v.  Marye,  107  Fed.  Rep.  570, 
But  see  Newport  v.  Mudgett,  18  Wash.  271,  distinguishing  1st  Nat.  Bk. 
of  Aberdeen  v.  Chehalis  Co.,  and  Nat.  Bk.  of  Com,  of  Seattle  v.  Seattle, 
supra,  p.  320,  and  holding  the  deduction  of  debts  from  the  assessed  value 
ol  national  bank  shares  required  under  the  State  constitution. 


§  290  STATE  TAXATION  OF  NATIONAL  BANKS.  329 

ties  to  reach  intangible  pers©nal  propcrtj^  for  taxation,  have 
proved  unsuccessful.  Such  failure  growing  out  of  the 
inherent  difficulties  of  enforcing  such  taxation,  does  not 
constitute  an  intentional  discrimination  within  the  meaning 
of  the  Act  of  Congress,  for  the  difficulty  is  not  in  the 
State  statute  nor  in  its  intentional  administration.  There 
must  be  a  substantial  showing  in  any  event  that  the  prop- 
erty escaping  taxation  is  capital  competing  for  business 
with  the  national  banks,  not  merely  a  general  averment  of 
a  legal  conclusion.  Facts  must  be  stated,  so  that  the 
court  can  determine  as  to  the  taxable  character  of  the 
property  which  it  is  claimed  is  exempted.^ 

§  290.  Discrimination  m.ust  be  substantial. 

Whatever  be  the  character  of  the  discrimination,  it  must 
be  substantial,  so  as  to  constitute  an  effective  violation  of 
equality  of  taxation  upon  national  bank  stock  as  compared 
with  other  and  competing  moneyed  capital. ^  As  shown 
supra,  §  268,  the  fact  that  the  tax  illegally  imposed  is  no 
greater  in  amount  than  a  legal  tax  would  be  constitutes  no 
defense,  so  that  form  as  w^ell  as  substance  may  be  material 
in  determining  the  validit}^  of  the  tax. 

Thus  in  Wisconsin,  where  State  banks  were  requh-ed  to 
pay  a  semi-annual  State  tax  of  three-fourths  of  one  per 
cent  on  the  amount  of  the  capital  stock,  regardless  of  the 
fact  whether  the  capital  was  invested  in  United  States 
securities  or  w^hcther  it  had  been  lost  in  business  or  not, 
the  court  held  that  it  was  in  effect  a  franchise  tax,  and 
therefore  a  fair  equivalent  to  that  imposed  on  the  shares  of 
stock  of  national  banks. ^ 

1  Aberdeen  Bank  u.  Chehalis  County,  166  U.  S.  440;  Primm  v.  Fort, 
23  Texas  Civ.  App.  605. 

2  Lionberger  v.  Rowse,  9  Wall.  468;  Richards  v.  Town  of  Rock 
Rapids,  31  Fed.  Rep.  505. 

3  Van  Slyke  v.  The  Slate,  23  Wise.  655;  Bagnall  v.  The  State,  25 
Wise.  112,  affirmed  in  154  U.  S.  581. 


330  STATE  TAXATION  OF  NATIONAL  BANKS.  §   291 

The  revenue  law  of  Kentucky  imposing  a  tax  on  bank 
stock  of  fifty  cents  on  each  share  equal  to  one  hundred 
dollars  of  stock  was  heldvalidas  to  national  banks  ^because 
the  tax  was  clearly  intended  to  be  at  the  rate  of  fifty  cents 
per  one  hundred  dollars  or  one-half  of  one  per  cent  on  the 
share,  whatever  the  par  value  of  the  stock. 

§  291.  Difference  in  rate  of  taxation  not  necessarily  dis- 
criminative. 

The  statute  forbids  discrimination  between  national  and 
State  banks  or  in  favor  of  other  moneyed  capital  in  the  hands 
of  private  individuals,  but  it  does  not  prohibit  a  difference  in 
rate  between  national  banks  under  different  circumstances, 
provided  State  banks  and  competing  monej^ed  capital  are 
treated  in  the  same  way.  Thus  the  statute  of  Pennsylvania 
provided  that,  where  any  bank  collected  from  its  share- 
holders a  tax  of  eight  mills  on  the  dollar  upon  the  par  value 
of  its  shares  and  paid  the  same  into  the  State  treasury,  its 
shares  and  so  much  of  its  capital  and  profits  as  should  be 
invested  in  real  estate  should  be  exempted  from  local  taxa- 
tion ;  but  if  any  national  bank  failed  to  collect  the  tax  of 
eight  mills  on  the  dollar  upon  the  par  value  of  its  shares, 
it  must  then  make  a  return  showing  the  full  number  of 
shares  of  capital  stock  issued  by  it  and  the  actual  value 
thereof,  which  should  be  assessed  for  taxation  at  the  same 
rate  as  that  imposed  upon  other  moneyed  capital  in  the 
hands  of  individual  citizens,  that  is  to  say,  at  the  rate  of 
four  mills  on  the  dollar  of  the  actual  value  thereof.  Thus 
if  the  bank  had  a  large  surplus  and  its  stock  was  in  conse- 
quence worth  several  times  its  par  value,  it  would  naturally 
elect  to  pay  the  eight  mills,  and  thus  in  fact  pay  at  a  less 
rate  on  the  actual  value  of  its  stock  than  a  bank  without  a 
surplus  whose  stock  was  only  worth  par.     The  court  held 

1  National  Bank  v.  Commonwealth,  9  Wall.  353. 


§   292  STATE  TAXATION  OF  NATIONAL  BANKS.  331 

that  this  was  no  violation  of  the  National  Banking  Act.^  It 
was  urged  that  there  was  discrimination,  because,  in  case 
the  State  banks  did  not  elect  to  pay  the  eight  mills,  the 
State  would  look  to  the  stockholders  directly  for  the  regu- 
lar four  mills  tax ;  whereas  as  to  national  banks  it  would 
reach  the  stockholders  through  the  bank  itself,  and  hence 
some  shareholders  in  State  banks  might  escape  taxation. 
But  the  court  said  that  this  was  a  mere  matter  of  procedure 
and  did  not  affect  the  validity  of  the  law. 

§  292.  Equality  of  taxation  requires  equalitj'  in  valuation 
as  well  as  in  rate  of  taxation. 

It  is  obvious  that  inequalit}^  in  taxation  is  effected  as 
surely  through  difference  in  valuation  by  the  assessors  as 
by  difference  in  the  rate  of  taxation  imposed  by  law.  Such 
inequality  between  the  assessment  of  national  bank  shares 
and  other  competing  moneyed  capital  involves  a  discrimina- 
tion in  violation  of  the  Act  of  Congress.  This  principle  has 
been  applied  in  several  adjudged  cases  and  the  rule  estab- 
lished that  the  inequality,  to  constitute  discrimination,  must 
be  something  more  than  sporadic  and  occasional,  must  in 
fact  be  habitual  and  intentional,  so  as  to  constitute  a  rule 
of  conduct. 

Thus  the  Supreme  Court  said  in  a  New  York  case :  ^  — 

"  This  valuation,  then,  is  part  of  the  assessment  of 
taxes. 

"  It  is  a  necessary  part  of  every  assessment  of  taxes 
which  is  governed  by  a  ratio  or  percentage.  There  can  be 
no  rate  or  percentage  without  a  valuation.  This  taxation, 
sa^'s  the  act,  shall  not  be  at  a  greater  rate  than  is  assessed 
on  other  moneyed  capital.  What  is  it  that  shall  not  be 
greater?     The  answer  is,  taxation.     In  what  respect  shall 

^  Merchants'  &  Manufacturers'  Bank  v.  Pennsylvania,  167  U.  S.  461. 
-  People  V.  Weaver,  lOO  U.  S.  539, 1.  c.  p.  545. 


332  STATE  TAXATION  OF  NATIONAL  BANKS.  §  293 

it  be  not  greater  than  the  rate  assessed  upon  other  capital? 
We  see  that  Congress  had  in  its  mind  an  assessment^  a  rate 
of  assessment,  and  a  valuation;  and,  taking  all  these  to- 
gether, the  taxation  on  these  shares  was  not  to  be  greater 
than  on  other  moneyed  capital." 

In  an  Ohio  case  it  appeared  that  the  city  of  Cleveland 
generall}''  assessed  bank  shares  higher  than  other  personal 
jDroperty,  and  that  this  was  not  a  mere  occasional  incident, 
but  a  rule  of  conduct  deliberately  adopted.  The  tax  on 
national  bank  shares  was  about  sixty  per  cent  of  its  real 
value  greater  than  that  on  other  moneyed  capital.^ 

§  293.  Sxipreme  Court  on  assessors'  practice  of  valuation. 

In  another  Ohio  case  from  Toledo,  it  appeared  that  a  rule 
of  valuation  had  been  established  by  the  assessors,  whereby 
ordinary  personal  property  was  assessed  at  about  one-third 
of  its  actual  value,  money  or  invested  capital  at  three-fifths 
of  its  actual  value,  while  the  assessment  of  shares  of  in- 
corporated banks  was  fully  equal  to  their  selling  price  and 
true  value  in  money.  It  was  said  that  while  the  constitution 
and  statutes  of  nearly  all  the  States  have  enactments  de- 
signed to  compel  uniformity  of  taxation  and  assessments  at 
the  actual  value  of  all  property  liable  to  taxation,  3'et  it  is  a 
matter  of  common  observation  that  in  the  assessment  of  real 
estate  this  rule  is  habitually  disregarded. ^ 

The  opinion  concluded.  I.e.  page  163  :  — 

"  And  while  it  may  be  true  that   there  has  not  been  in 

1  Pelton  V.  National  Bank,  101  U.  S,  143, 

2  Cummings  v.  National  Bank,  101  U.  S.  153,  Chief  Justice  Waite  dis- 
senting. As  to  the  presumption  of  violation  of  official  duty  in  such  cases, 
see  comments  on  this  opinion  in  New  York  ex  rel.  v.  Barker,  179  U.  S. 
279, 1.  c.  286.  But  it  was  held  in  Texas,  Engelke  v.  Schlenker,  75  Tex. 
559,  that  the  legality  of  the  assessment  of  a  tax  upon  the  property  of  a 
national  bank  which  does  not  exceed  its  true  value  cannot  be  affected  by 
the  custom  of  the  assessor  to  assess  other  property  at  a  uniform  valua- 
tion less  than  its  true  value. 


§   294  STATE  TAXATION  OF  NATIONAL  BANKS.  333 

other  States  such  concerted  action  over  a  large  district  of 
country  by  the  primary  assessors  in  fixing  the  precise  rates 
of  departure  from  actual  value,  as  is  shown  in  this  case,  it 
is  believed  that  the  valuation  of  real  estate  for  purposes  of 
taxation  rarely  exceeds  half  of  its  current  salable  value. 
If  we  look  for  the  reason  for  this  common  consent  to  sub- 
stitute a  custom  for  the  positive  rule  of  the  statute,  it  will 
probably  be  found  in  the  difficulty  of  subjecting  personal 
property,  and  especially  invested  capital,  to  the  inspection 
of  the  assessor  and  the  grasp  of  the  collector.  The  effort 
of  the  land  owner,  whose  property  lies  open  to  view,  which 
can  be  subjected  to  the  lien  of  a  tax  not  to  be  escaped  by 
removal,  or  hiding,  to  produce  something  like  actual 
equality  of  burden  b}^  an  undervaluation  of  his  land, 
has  led  to  this  result.  But  whatever  may  be  its  cause, 
when  it- is  recognized  as  the  source  of  manifest  injustice  to 
a  large  class  of  property  around  which  the  constitution  of 
the  State  has  thrown  the  protection  of  uniformity  of  taxa- 
tion and  equality  of  burden,  the  rule  must  be  held  void, 
and  the  injustice  produced  under  it  must  be  remedied  so  far 
as  the  judicial  power  can  give  remedy." 

§  294.  Inequality  must  be  intentional  and  habitual. 

In  both  these  Ohio  cases  injunctions  were  granted,  com- 
plainants having  paid  into  court  the  amount  admitted  to  be 
due.  This  principle  that  inequality  in  valuation  constitutes 
discrimination  has  been  followed,  but  with  the  qualification 
already  noted,  that  it  must  affirmatively  appear  that  the 
inequality  is  intentional  and  habitual.  Thus  in  a  New 
York  case,  where  the  assessors  had  adopted  the  plan  of 
valuing  bank  shares  at  par,i  and  an  action  at  law  had  been 
brought  to  recover  taxes  alleged  to  have  been  illegally  col- 


1  Stanley  v.   Supervisors  of  Albany,  121  U.   S.  535.     See  also  as  to 
procedure,  Williams  v.  Supervisors,  122  U.  S.  154. 


334  STATE  TAXATION  OF  NATIONAL  BANKS.  §    294 

lected,  the  court  held  that  the  testimony  did  not  warrant 
the  inference  that  there  was  an  habitual  assessment  of 
national  bank  shares  at  a  higher  rate  than  other  moneyed 
capital,  and  commented  on  the  assessnient  at  par  as  fol- 
lows, 1.  c.  page  548  :  — 

"  A  different  method  might  have  led  to  perplexing  diffi- 
culties, owing  to  the  great  fluctuations  to  which  shares  in 
banking  institutions  are  subject,  their  value  depending 
very  much  on  the  skill  and  wisdom  of  the  managers  of 
those  institutions.  Intelligent  men  constantly  differ  in 
their  estimate  of  the  value  of  such  property,  and  the  stock 
market  shows  almost  daily  changes.  Presumptively  the 
nominal  value  is  the  true  value,  any  increase  from  profits 
going,  in  the  natural  course  of  things,  in  dividends  to  the 
stockholders.  This  method,  applied  to  all  banks,  national 
and  State,  comes  as  near  as  practicable,  considering  the 
nature  of  the  property,  to  securing,  as  between  them,  uni- 
formity and  equality  of  taxation;  it  cannot  be  considered 
as  discriminating  against  either.  Both  are  placed  on  the 
same  footing."     *     *     « 

It  was  said  that  the  proper  remedy  in  such  a  case,  if  re- 
lief was  not  afforded  by  the  State  revising  boards,  was  by 
application  to  a  court  of  equity  to  restrain  the  collection  of 
the  excess  upon  payment  or  tender  of  what  was  admitted 
to  be  due. 

In  another  Ohio  case  it  appeared  that  other  moneyed  capi- 
tal was  valued  on  a  sixty  per  cent  basis  and  bank  shares  at 
a  rate  of  sixty-five  per  cent,  and  the  collection  of  the  excess- 
ive five  per  cent  was  restrained.^ 

In  a  case  from  Illinois,  where  it  appeared  that  the  assess- 
ments were  partial,  unequal,  unjust,  and  lacking  in  uni- 
formity, but  that  there  was  no  intentional  discrimination 

1  Whitbeckv.  Mercantile  National  Bank  of  Cleveland,  127  U.  S.  193. 


§  295      STATE  TAXATION  OF  NATIONAL  BANKS.         335 

ao-ainst  national  banks,  it  was  said  as  to  the  New  York  and 
Ohio  cases  above  cited :  ^  — 

"  It  is  held  in  these  cases  that  when  the  inequality  of 
valuation  is  the  result  of  a  statute  of  the  State  designed 
to  discriminate  injuriously  against  any  class  of  persons  or 
any  species  of  property,  a  court  of  ecjuity  will  give  appro- 
priate relief;  and  also  where,  though  the  law  itself  is  un- 
objectionable, the  officers  who  are  appointed  to  make 
assessments  combine  together  and  establish  a  rule  or  prin- 
ciple of  valuation,  the  necessary  result  of  which  is  to  tax 
one  'species  of  property  higher  than  others,  and  higher 
than  the  average  rate,  the  court  will  also  give  relief.  But 
the  bill  before  us  alleges  no  such  agreement  or  common 
action  of  assessors,  and  no  general  rule  or  discriminating 
rate  adopted  by  a  single  assessor,  but  relies  on  the  numer- 
ous instances  of  ptirtial  and  unequal  valuations  which 
establish  no  rule  on  the  subject." 

§  295.  Mere  mistake  in  judgment  no  discrimination. 

The  rule  of  the  Kimball  case  was  applied  by  the  United 
States  Circuit  Court  for  the  Southern  District  of  Ohio,^ 
where  it  appeared  from  the  testimony  that  there  was  a  gen- 
eral understanding  at  a  meeting  of  the  assessors  from  all 
parts  of  the  State,  that  real  estate  should  be  assessed  at 
two-thirds  to  three-fourths  of  its  value ;  and  there  was 
evidence  tending  to  show  great  inequality  in  valuations  of 
all  kinds  of  personal  property,  including  shares  of  national 
banks,  which  were  valued  at  about  86.7  per  cent,  a  higher 
rate  than  that  at  which  other  personal  property  was  taxed. 

1  National  Bank  v.  Kimball,  103  U.  S.  732.  See  also  First  National 
Bank  of  Chicago  v.  Farwell,  7  Fed.  Rep.  518;  Stanley  v.  Board  of  Super- 
visors, 15  Fed.  Rep.  483;  Exchange  National  Bank  v.  Miller,  19  Fed.  Rep. 
372;  First  National  Bank  of  Toledo  v.  Lucas  County,  25  Fed.  Rep.  749; 
First  National  Bank  v.  Lindsay,  45  Fed.  Rep.  619. 

2  Exchange  National  Bank  v.  Miller,  19  Fed.  Rep.  372. 


336        STATE  TAXATION  OF  NATIONAL  BANKS.      §  295 

But  it  did  not  appear  that  this  arose  otherwise  than  from 
a  mistake  in  judgment.     The  court  said,  at  page  375  :  — 

"  It  would,  perhaps,  be  more  exact  to  say  that  the  judo-- 
ment  of  the  assessors,  in  their  official  valuation,  differs  from 
the  judgment  of  witnesses  in  their  unofficial  valuation,  as 
expressed  in  their  testimony.  The  differences  are  no  greater 
than  frequently  arise  between  witnesses  in  cases  on  trial 
on  questions  of  value.  And  there  is  no  certain  standai'd  by 
which  the  court  can  determine  whieh  is  correct.  Valuations, 
excepting  of  money  and  of  standard  marketable  articles, 
are,  at  best,  uncertain.  The  influences  which  affect  salable 
values  are  various  and  often  conjplicated.  Much  depends 
upon  who  is  the  owner  or  vendor,  as  well  as  upon  who  is 
the  purchaser.  The  shrinkage  in  the  value  of  estates  re- 
sults in  many  instances  largely  from  the  consideration  that 
the  salable  value  imparted  by  the  fact  of  the  ownership  of 
the  deceased  is  gone.  A  thousand  influences,  tangible 
and  intangible,  so  affect  the  salable  value  of  property,  real 
and  personal,  in  the  city  and  in  the  country,  as  to  make  its 
true  valuation  a  work  of  exceeding  difficulty,  and  it  is  not  to 
be  wondered  at,  nor  is  it  a  circumstance  of  itself  warrantino: 
an  appeal  to  a  court  of  chancery,  that  there  are  great  ine- 
qualities in  valuations  for  taxation.  To  correct  these  the 
State  has  provided  for  appeals  to  appropriate  tribunals, 
whose  dut}^  it  is  to  equalize  valuations  and  the  burden  of 
taxation.  "When  these  are  exhausted  all  that  can  be  done, 
practically,  is  done,  excepting  in  cases  of  intentional  dis- 
crimination."^ 


1  The  mere  fact  that  there  is  a  different  mode  of  taxing  moneyed 
capital  in  savings  banks  and  other  corporations  from  that  employed  in 
the  case  of  national  banks  is  not  enough  to  show  discrimiQation.  Rich- 
ards V.  Rock  Rapids  (Iowa),  31  Fed.  Rep.  505.  The  court  said  that,  if 
the  total  burden  of  taxation  upon  the  property  of  the  State  bank  was 
substantially  equal  to  that  upon  the  national  bank,  there  was  no  ground 
to  complain. 


§   296  STATE  TAXATION  OF  NATIONAL  BANKS.  337 

§  296.  Formal  resolution   not   necessary  for  intentional 
discrimination. 

But  it  is  not  necessary  that  the  intention  of  the  assessors 
to  discriminate  should  be  proved  by  formal  resolution  to 
that  effect. 

In  another  case  iri  Ohio,  in  the  Northern  District, ^  it 
was  said  that  there  was  nothing  in  the  Kimball  case  which 
modified  the  principle  declared  in  the  Cummings  and 
Pelton  cases.  While  inequality  of  valuation  arrived  at 
by  an  eiToneous  mathematical  calculation  will  not  justify 
equitable  relief  any  more  than  a  result  reached  b}'  the  im- 
perfect process  of  human  judgment,  3'et,  where  the  evi- 
dence shows  upon  its  face  that  there  is  a  systematic  rule 
which  necessarily  discriminates,  a  court  of  equity  has 
jurisdiction  to  relieve.  It  appeared  in  this  case  that  there 
was  a  tacit  understanding  that  all  personal  property  should 
be  valued  at  six-tenths  of  its  actual  value,  but  national 
banks  were  assessed  at  a  larger  per  cent.  The  collection 
of  the  excess  was  restrained,  although  the  assessment  was 
imposed  by  the  State  Board  of  Equalization  in  the  attempt 
to  equalize  national  banks  inter  sese  throughout  the  State. 
It  seems  that  the  average  rate  for  national  banks  was  sixty- 
eight  per  cent,  while  that  of  the  State  banks  was  fifty-nine 
per  cent.     The  court  added  at  page  757  :  — 

"  Certainly,  the  conspicuous  and  intelligent  oflScials 
constituting  this  State  Board  of  Equalization  understood,  as 
we  do,  that  inequalities  and  discriminations  were  the  neces- 
sary outcome  of  their  '  rules ;  '  and  they  found  their 
justification,  no  doul)t,  and  not  unnaturally,  in  the  decision 
of  the  State  Supreme  Court  that,  as  long  as  they  kept 
below  the  '  tnte  value  in  money '  in  all  cases,  there  was 
no  violation  of  the  constitution  and  laws  of  the  State  of 
Ohio,   and    discriminations   were    immaterial.     But    they 

^  First  Nat.  Bank  of  Toledo  v.  Lucas  County,  25  Fed.  Rep.  749. 

22 


338  STATE  TAXATION  OF  NATIONAL  BANKS.  §    297 

certaiiily  overlooked  the  Act  of  Congress  as  interpreted  by 
the  Supreme  Court  of  the  United  States.  For,  although 
their  action  in  the  premises  did  not  necessarily,  nor  in  fact, 
result  in  taxing  any  national  bank  at  a  valuation  higher 
than  its  true  value  in  money,  as  shown  by  the  bank's  own 
return,  or,  perhaps,  not  higher  than  its  true  value  in  money 
as  shown  by  the  selling  prices  in  the  market,  it  did  result, 
as  we  can  see  in  a  general  way,  if  we  take  the  State  of  Ohio 
as  the  unit  of  locality  in  assessing  the  national  banks,  on 
the  average,  higher  than  the  '  other  moneyed  capital ' 
invested  in  State  banks."  ^ 

§  297.  Difference  in  valuation  of  different  classes  of 
personalty  not  necessarily  discriminative  against 
national  banks. 

The  difficult}^  in  reaching  for  taxation  intangible  personal 
property  has  led  to  the  adoption  in  the  State  of  Mary- 
land of  a  system  of  valuation  of  bonds  and  certificates  of 
indebtedness,  adjusted  upon  a  sliding  scale  according  to  the 
rate  of  interest  to  be  paid.  Thus  bonds  bearing  six  per 
cent  interest  are  assessed  at  fifty  per  cent  of  their  face ; 
those  bearing  five  per  cent  at  forty-one  and  two-thirds  of 
their  face,  and  so  on.  It  was  urged  by  a  national  bank 
that  certain  private  bankers,  whose  business  was  in  compe- 
tition with  national  banks,  were  investing  their  capital  in 
these  securities,  thus  obtaining  an  advantage  over  national 
banks  which  were  assessed  at  their  full  valuation  equally 
with  other  property  and  with  State  banks  and  trust  com- 
panies. The  United  States  Circuit  Court  of  Appeals  ^  held 
that  there  was  no  discrimination  within  the  meaning  of  the 
Act  of  Congress. 

1  See  Chapter  XVI  on  Equal  Protection  of  the  Laws  in  Valuation  of 
Property  for  Taxation. 

2  National  Ban  kof  Baltimore  v.  Baltimore,  40  C.  C.  A.  254,  100  Fed. 
Rep.  24. 


§  297      STATE  TAXATION  OF  NATIONAL  BANKS.        339 

The  court  said  that  the  term  "moneyed  ca])ital,"  as 
used  in  the  Act  of  Congress,  has  a  restricted  meanino-. 
Wherever  money  is  employed  as  money  in  carrying  on  a 
business  the  object  of  which  is  the  making  of  profit,  it  is 
used  as  moneyed  capital.  There  is  nothing  in  the  statutes 
of  the  United  States  relating  to  national  banks  which  in- 
hibits the  States  from  differential  taxation  generally,  and 
the  fact  that  some  property  not  shown  to  be  an  appreciable 
portion  of  the  whole  escapes  taxation,  furnishes  no  o-round 
for  relief.     The  court  commented  upon  the  vexed  question 

of  personal  property  taxation   as  follows,  pp.  257-258: 

"The  taxation  of  personal  property  has  always  and 
everywhere  been  a  vexatious  problem.  Horses  and  cattle, 
wagons  and  carriages,  the  implements  of  husbandry  and 
household  furniture,  —  all  things,  in  fact,  which  are  visi- 
ble, and  cannot  readily  be  concealed,  including  therein 
shares  in  incorporated  companies  which  may  be  compelled 
by  the  law  creating  them  to  make  returns,  —  are  within 
comparatively  easy  reach  of  the  tax  assessors.  But  the 
great  mass  of  personal  property,  in  which  the  Avealth  of  a 
country  is  invested,  consisting  of  bonds  and  other  evi- 
dences of  credit,  which  can  be  readily  hidden,  escape  the 
eye  of  the  assessor,  and  nothing  is  more  conclusively  settled 
by  human  experience  than  that  it  is  impossible  to  collect 
taxes  upon  this  kind  of  property  with  any  reasonable  ap- 
proach to  accuracy  or  equality,  and  this  is  not  for  want  of 
long  sustained  and  earnest  effort  to  accomplish  it.  There 
is  a  monotonous  uniformity  in  the  reports  of  the  failures 
of  every  system  attempted,  however  stringent  may  be  the 
legislation,  or  however  arbitrary  or  despotic  may  be  the 
powers  with  which  the  assessors  may  be  clothed.  The 
heavy  hand  of  the  tax  gatherer  always  falls  upon  the  widow 
and  the  orphan,  upon  trustees  and  guardians,  whose  estates 
are  required  by  law  to  be  revealed  to  the  courts  of  pro- 
bate, and  upon  those    only  whose  consciences  are  unusu- 


340        STATE  TAXATION  OF  NATIONAL  BANKS.      §  297 

ally    scrupulous,    and    who,    having    least    experience  in 
business,  are   least   able  to   bear    the   burden,  while   the 
most  inadequate  returns  are  invariably  made  by  the  rich, 
who    are    usually  most    ingenious    in   evasion    and  most 
fertile   in    expedients  to  escape    taxation.     The    result  is 
that  always  and  everywhere  no  appreciable  part  of  such 
intangible  property   is   reached   by   laws,  however  ingen- 
iously  framed   or    severely    enforced.      The     heavy  and 
ever-increasing  rate  of    taxation   in    our  cities   makes  this 
result  inevitable.     Safe  investments  are  rarely  found  which 
yield  more  than  4  per  cent,  and  the  rate  of   taxation  being 
o-enerally  from  2  to  3  per  cent,  it  is  not  to  be  wondered   at 
that  there  should  be  endeavor  to  escape  a  burden   which 
takes  more  than  half  of  their  income.     Evasion  and  down- 
rio-ht  perjury    is    the  consequence.     The-  legislation   com- 
plained of  is  the  outgrowth  of  this  state  of  things,  which  is 
not  peculiar  to  the  State  of  Maryland,  but  the   lawmakers 
of  th-at  State,  having  in  view  that  trait  of  human   nature 
which  impels  the  man  of  average  honesty  to  be  in   matters 
of  taxation  about  as  honest  as  he  thinks  he  can  afford  to  be, 
have  endeavored  to  bring  hoarded  wealth  from  its   hiding, 
by  the  promise  of  taxation  at  a  rate  which  would  not  be 
practically  confiscatory,  with  the  result  that  over  $50,000,000 
of  property  has  been  returned  for  taxation  which  had  never 
before  been  brought  to  light.     The  exact  figures  are  that 
before  the  passage  of  this  act  $6,481,047  was  returned,  the 
greater  part  of  this    amount   belonging   to    trust    estates, 
while  in  the  year  following  $58,885,000    was   returned  for 
taxation;   and  the  precise  question  now  presented  for  deter- 
mination is  whether  the  valuation  of  this  property  for  pur- 
poses of  taxation  at  30  cents  on  the  $100  works  such  a  dis- 
crimination against  national  banks  that  the  courts  should  be 
compelled  to  declare  this  legislation  void,  as  ojjnoxious  to 
the  provisions  of  the  statute  of  the  United  States  intended 
to  prevent  hostile  discrimination  against  national  banks." 


§  298      STATE  TAXATION  OF  NATIONAL  BANKS.        341 

The  court  concluded  that  the  legislation  was  not  in- 
spired by  any  spirit  of  hostility  to  national  banks  and 
did  not  fall  within  the  inhibition  of  the  Act  of  Con- 
gress. 

§  298.  Taxation  of  real  estate  of  national  banks. 

The  real  estate  of  national  banks  wherever  located, 
whether  in  the  State  of  the  bank's  location  or  elsewhere, 
is  taxable  like  other  real  estate.  As  already  pointed  out, 
there  need  be  no  deduction  from  the  value  of  the  shares 
of  national  banks  on  account  of  the  value  of  real  estate  lo- 
cated and  taxed  in  other  States,  supra,  §  272.  There  is  no 
provision  in  the  Act  of  Congress  requiring  the  deduction  of 
the  valuation  of  real  estate  located  in  the  State  of  the  loca- 
tion of  the  bank  from  the  valuation  of  the  shares.  Where 
the  laws  of  the  State  require  the  appraised  value  of  the  real 
estate  of  corporations  to  be  deducted  from  the  actual  value 
of  the  shares  before  they  are  listed  for  taxation,  national 
bank  shareholders  are  entitled  to  the  same  deduction,  and 
the  denial  of  this  right  would  be  not  only  violative  of  the 
Act  of  Congress,  but  a  denial  of  the  equal  protection  of  the 
laws.^  It  has  been  held  in  a  number  of  State  courts  con- 
struing the  laws  of  those  particular  States,  that  the  assessed 
value  of  the  real  estate  must  be  deducted  from  the  valua- 
tion of  the  shares.  Thus  the  Court  of  Appeals  of  Maiyland  ^ 
decided  that  the  State  can  tax  the  real  property  or  the 
shares  of  stock  of  a  national  bank  but  not  both.  The  court 
said  that  it  is  not  a  mere  metaphysical  subtlety  to  say  that 
the  corporate  propert}'  is  represented  by  the  shares  of  stock, 
and  that  it  is  substantially  true  that  the  taxes  assessed  on 

1  City  National  Bank  ».  Paducah,  U.  S.  Circuit  Court  of  Kentucky, 
1  National  Bank  Cases  300. 

2  County  Commissioners  of  Frederick  County  r.  Farmers'  &  Mechan- 
ics' Bank,  48  Md.  117. 


342        STATE  TAXATION  OF  NATIONAL  BANKS.      §  298 

the  property  of  the  corporation  are  in  reality  paid  by  the 
shareholders  and  paid  by  them  directly.^ 

It  was  held  in  Indiana,  where  the  statute  directed  that 
the  realty  of  national  banks  should  be  taxed  like  other 
realty  and  its  value  deducted  from  the  capital  stock,  the 
shares  of  which  must  then  be  taxed  to  the  holders,  that 
the  bank  could  not  recover  the  taxes  paid  on  its  realt}'^  on 
the  ground  that  the  value  of  the  realty  had  not  been 
deducted  from  the  capital  stock,  for  the  wrong  in  not  mak- 
ing the  deduction  was  done  to  the  stockholders  and  not  to 
the  bank. 2 

In  New  York,^  the  State  court,  construing  the  New  York 
statute,  held  that  the  assessor  must  deduct  from  the  actual 
value  of  each  share  the  sum  bearing  the  same  proportion 
thereto,  as  the  assessed  value  of  the  real  estate  of  the  bank 
bore  to  the  actual,  rather  than  the  nominal,  value  of  the 
capital  stock.* 

In  other  States  it  has  been  held  that,  where  the  statute 
requires  the  shares  to  be  taxed  at  their  actual  value  with- 
out deduction  for  the  real  estate,  this  includes  the  taxation 
of  the  realty,  which  is  accordingly  exempt  from  unequal 
separate  assessment.^ 

^  On  this  point  that  double  taxation  of  banks  is  effected  by  taxing 
both  property  and  stocii,  see  New  Haven  v.  City  Bank,  31  Conn.  106; 
Nichols  V.  N.  H.  &  N.  Co.,  42  Conn.  103;  People  ex  rel.  v.  Tax  Com- 
missioner, 69  N.  Y.  91;  Citizens'  National  Bank  v.  Loftin,  85  Ind.  341. 
But  contra,  upholding  the  right  of  double  taxation,  see  City  of  Memphis 
V.  Bank,  6  Baxter  415;  Macon  «.  First  National  Bank,  59  Gi.  648. 

-  Board  of  Commissioners  v.  First  National  Bank,  57  N.  E.  Rep.  (Ind.) 
728. 

2  People  ex  rel.  v.  Tax  Commissioner,  69  N.  Y.  91. 

^  The  statute  in  this  case  provided  for  deducting  "  from  the  value  of 
such  shares  such  sura  as  is  in  the  same  proportion  to  such  value  as  is  the 
assessed  value  of  the  real  estate  of  the  bank  to  the  whole  amoant  of  the 
capital  stock  of  the  said  bank." 

''  Board  of  Commissioners  of  Rice  County  t>.  Faribault,  23  Minn.  280. 
See  also  Lackawanna  v.  National  Bank,  94  Pa.  221 ;  County  of  Lancaster 


§  300      STATE  TAXATION  OF  NATIONAL  BANKS.        343 

§  299.  Double  taxation  of  national  banks. 

These  decisions  of  the  State  courts  however,  denying  the 
right  of  double  taxation  by  taxing  the  bank  shares  without 
deduction  for  the  assessed  vahie  of  the  real  estate,  are 
based  upon  State  laws.  If  the  State  allows  the  double  tax- 
ation of  other  moneyed  capital  invested  in  corporate  shares, 
through  the  taxation  of  both  the  corporate  shares  and  cor- 
porate property,  there  is  no  prohibition  in  the  National 
Banking  Act  requiring  the  deduction  of  the  value  of  the  real 
estate  so  as  to  avoid  double  taxation  in  the  case  of  national 
banks. ^  There  is  no  discrimination  in  double  taxation  if 
all  of  the  same  class  are  subject  to  it. 

The  Act  of  Congress  protects  against  double  taxation,  as 
already  shown,  in  the  case  of  shares  held  by  non-residents, 
by  providing  that  such  shares  cannot  be  taxed  in  the  State 
of  the  owner's  domicil,  but  only  at  the  location  of  the  bank. 
There  is  no  protection  however  against  the  incidental 
double  taxation  growing  out  of  the  ownership  by  the  bank 
of  real  estate  located  in  other  States.  The  value  of  such 
real  estate  is  included  in  the  valuation  of  the  shares  of  the 
bank,  and  is  also  assessed  for  taxation  in  the  States  where 
situated. 

§  300.  Enforcement  of  tax. 

AVhere  the  bank  is  made  the  statutory  agent  of  the 
shareholders  for  the  payment  of  the  tax  and  the  duty 
imposed  upon  it  to  pay  the  whole  tax  to  the  State,  reim- 
bursing itself  from  the  shareholders,  it  has  been  held  that 
the  State  may  enforce  the  collection  of  the  tax  from  the 
bank  by  the  methods  employed  in  other  cases,  supra,  §  269. 

V.  Lancaster  County  National  Bank,    Common   Pleas  of   Pennsylvania,  2 
National  Bank  Cases  415. 

1  People's  National  Bank  v.  Marye  (Cir.  Ct.  7a.),  107  Fed.  Rep.  570,  the 
court  saying  that  this  seemed  to  be  the  view  of  the  Supreme  Court  in 
National  Bank  v.  Commonwealth,  9  Wall.  353, 1.  c.  358. 


344  STATE  TAXATION  OF  NATIONAL  BANKS.  §  301 

Where  the  assessment  is  against  the  shareholder  per- 
sonally, without  any  statutory  right  to  enforce  payment 
from  the  bank,  the  State  may  employ  the  same  remedies 
against  the  shareholders  as  against  other  delinquents  in  the 
payment  of  personal  property  taxes.  Thus  a  stockholder 
in  a  national  bank  is  bound  to  take  notice  of  the  time 
appointed  by  the  statute  for  the  hearing  of  complaints  in 
regard  to  assessment  of  bank  stock;  and  the  proceeding 
by  which  the  valuation  is  determined,  though  it  may  be 
followed,  if  the  tax  is  not  paid,  b}^  a  sale  of  the  delinquent's 
property,  is  due  process  of  law.^  Where  the  State  stat- 
ute authorizes  not  only  distress  and  sale  gf  personal  prop- 
erty, but  fine  for  misconduct  for  the  non-payment  of  the 
personal  property  tax,  such  statute  ma}^  be  enforced  against 
the  delinquent  national  bank  stockholder. ^ 

§  301.  Visitorial  power  of  State  over  national  banks. 

The  State  has  the  power  to  require  the  cashier  of  a 
national  bank  to  furnish  to  the  designated  official  a  true 
list  of  the  names  of  shareholders  and  the  number  of 
shares.^  The  court  said  that  the  national  banks  are  subject 
to  State  legislation,  except  where  such  legislation  is  in  con- 
flict with  some  Act  of  Congress,  or  where  it  tends  to  destroy 
or  impair  the  utility  of  the  banks  as  agencies  of  the  United 
States,  or  interfere  with  the  purposes  of  their  creation. 
It  was  no  objection  to  such  a  law  that  the  Act  of  Congress 
requires  the  national  bank  to  keep  a  list  of  its  stockholders 
posted  up  in  its  business  office.  The  State  has  the  right  to 
pass  such  a  law  for  the  purpose  of  enforcing  its  taxation 
of  the  shares.     It  was  objected  that  the  purpose  of  the  act 

1  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461. 

2  Pdlmer  v.  McMahon,  133  U.  S.  6(]0,  see  infra,  §  331.  As  to  subject- 
ing non-resident  owners  of  shares  in  national  banks  to  personal  liability, 
See  City  of  New  York  v.  McClean,  mfra,  §  898. 

3  Waite  V.  Dowley,  94  U.  S.  627. 


§  301  STATE  TAXATION  OF  NATIONAL  BANKS.  345 

was  to  enable  the  towns  of  residence  of  the  shareholders 
to  tax  them,  and  that  this  was  invalid  under  the  Act  of  Con- 
gress as  it  then  stood.  The  court  replied  it  could  not  deter- 
mine that  question  until  it  was  properly  raised  through  an 
attempt  to  collect  such  a  tax. 

It  is  provided  by  the  National  Banking  Act,  Section  5241, 
that  the  banking  associations  shall  not  be  subject  to  any  visit- 
orial  powers  other  than  such  as  are  authorized  by  the  act  or 
are  vested  in  the  courts  of  the  country.  It  was  held  in  the 
United  States  Circuit  Court  of  Ohio^  that  this  section  did 
not  warrant  an  injunction  against  a  proceeding  under  the 
State  law  of  Ohio,  in  which  the  cashier  was  directed  to 
produce  the  deposit  books  of  the  bank  so  that  it  could  be 
ascertained  whether  any  person  had,  at  the  date  of  assess- 
ment for  taxation,  any  money  on  deposit  subject  to  taxation 
in  the  county,  which  had  not  been  returned  by  the  owner 
for  that  purpose. 


1  First  National  Bank  of  Youngstown  v.  Hughes,  6  Fed.  Rep.  737. 
But  in  a  prior  case  between  the  same  parties  an  injuuction  seems  to  have 
been  allowed,  see  First  National  Bank  of  Youngstown  v.  Hughes,  2  Nat. 
Bank  Cases  176. 


CHAPTER    X. 

THE  FOURTEENTH  AMENDMENT. 

§  302.  Occasion  and  immediate  purpose  of  amendment. 

303.  Slaughter  House  Cases. 

304.  Privileges  and  immunities  of  citizens  of  United  States. 

305.  Construction  of  amendment. 

306.  Amendment  applies  only  to  State  action. 

307.  Protection  not  limited  to  citizens. 

308.  Corporations  are  ''  persons"  under  Fourteentli  Amendment. 

309.  "Any  person"  and  "any  person  within  the  jurisdiction  "  distin- 

guished. 

310.  Application  of  amendment  to  State  taxation. 

311.  Justice  Field  on  Fourteenth  Amendment  and  State  taxation. 

312.  Circuit  Judge  Jackson  on    Fourteenth    Amendment    and    State 

taxation. 

313.  "Due  process  of  law"  and  "  the  equal  protection  of   the   laws  " 

distinguished. 

314.  Fourteenth  Amendment  in  State  courts. 

315.  Substance  and  not  form  regarded  in  alleged  violations  of  Four- 

teenth Amendment. 

316.  Fourteenth  Amendment  in  condemnation  for  public  purposes. 

"Section  1.  All  persons  born  or  naturalized  in  the  United  States  and 
subject  to  the  jurisdiction  thereof  are  citizens  of  the  United  States  and 
of  the  State  wherein  they  reside.  No  State  shall  make  or  enforce  any 
law  which  shall  abridge  the  privileges  or  immunities  of  citizens  of  the 
United  States,  nor  shall  any  State  deprive  any  person  of  life,  liberty  or 
property  without  due  process  of  law;  nor  deny  to  any  person  within  its 
jurisdiction  the  equal  protection  of  the  laws." 

'•  Section  5.  The  Congress  shall  have  power  to  enforce,  by  appropri- 
ate legislation,  the  provisions  of  this  Article." 

§  302.  Occasion  and  immediate  purpose  of  amendment. 

The  restraints  upon  the  State  power  of  taxation  dis- 
cussed in  the  preceding  chapters  have  been  those  growing 
out  of  the  reUition  of  the  State  to  the  Federal  government, 
created  by  the  Constitution  of  the  United  States.  Prior 
to  1868  there  was  no  guaranty  in  the  Federal  Constitution 
(346) 


§   302  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       347 

of  due  process  of  law  or  the  equal  i^rotection  of  the  laws 
to  the  people  of  the  States,  except  as  against  the  power  of 
the  Federal  crovernment.  Thus  the  fiiist  ei'o-ht  of  the  amend- 
ments,  known  as  the  Federal  Bill  of  Rights,  which  were 
adopted  immediately  upon  the  ratification  of  the  Constitu- 
tion, having  been  made  an  implied  condition  of  ratification 
in  some  of  the  States,  have  been  uniformly  construed  as 
applying  only  to  the  Federal  government  and  not  to  the 
States.  There  was  then  no  appeal  to  the  Federal  courts 
against  any  violation  by  State  power  of  equal  protection  of 
the  laws  in  taxation ,  which  did  not  involve  an  interference 
with  national  authority. 

The  Fourteenth  Amendment  has  been  called  the  child  of 
the  Civil  War,  but  it  may  more  accurately  be  said  that  it 
is  the  offspring  of  Reconstruction.  It  was  framed  by 
the  Joint  Reconstruction  Committee  of  Congress  in  1866, 
its  ratification  was  exacted  as  a  condition  of  the  ad- 
mission of  the  reconstructed  States  into  the  Union,  and 
its  adoption  was  proclaimed  under  the  direction  of  a  joint 
resolution  of  Congress  during  the  angry  political  contro- 
versies of  1868.^  The  occasion  and  immediate  purpose  of 
the  adoption  of  the  amendment  were  doubtless  the  securing 
the  results  of  the  Civil  War  and  protecting,  through  the 
national  power  ,  the  recently  emancipated  negroes  of  the 
South. 

The  amendment  contains  in  the  first  section  a  distinct 
declaration  of  what  shall  constitute  citizenship  of  the  United 

1  The  validity  of  the  adoption  was  at  flrst  disputed  by  the  minority  party 
in  Congress  on  the  ground  that  certain  States  had  recalled  their  ratifica- 
tion before  the  result  was  proclaimed,  and  that  Congress  had  no  author- 
ity to  make  the  ratification  a  condition  of  readmission  of  the  recon- 
structed States  into  the  Union.  These  questions  however  were  never 
determined.  See  Miller's  Lectures  on  the  Constitution,  p.  653.  Although 
many  cases  have  been  before  the  Supreme  Court  involving  the  construc- 
tion of  the  Fourteenth  Amendment,  in  no  one  has  any  question  been 
raised  as  to  its  ratification  and  incorporation  in  the  Constitution. 


348       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   302 

States,  and  provides  that  all  persons  born  or  naturalized 
in  the  United  States  and  subject  to  the  jurisdiction  thereof 
are  citizens  of  the  United  States  and  of  the  State  wherein 
they  reside.  This  in  effect  overruled  the  decision  in  the 
Dred  Scott  case.^  Other  provisions  related  to  securing  the 
results  of  the  war^  and  to  the  protection  of  the  national  debt 
from  repudiation.  In  order  to  protect  the  newly  emanci- 
pated race  from  the  action  of  State  governments,  it  was 
deemed  necessary  to  extend  the  guaranty  of  the  Federal 
Bill  of  Rights.  It  was  therefore  provided  that  no  State 
shall  make  or  enforce  any  law  which  shall  abridge  or 
impair  the  immunities  of  citizens  of  tlie  United  States,  nor 
shall  any  State  deprive  any  person  of  life,  liberty  or 
property  without  due  process  of  law,  nor  deny  to  any  per- 
son within  its  jurisdiction  the  equal  protection  of  the  laws. 
Owing  to  the  circumstances  attending  the  adoption  of 
the  amendment,  the  full  import  and  scope  of  the  conclud- 
ing clause   were  not  imuiediately  realized,^  and  there  was 

1  20  Howard  1.  This  case  held  that  persons  whose  ancestors  were 
members  of  the  African  race  imported  into  this  country  and  held  as 
slaves  could  not,  though  emancipated  or  born  of  parents  who  were  free, 
become  citizens  of  a  State  in  the  sense  in  which  that  word  was  used  ia 
the  Constitution  of  the  United  States. 

2  See  also  infra,  §  486. 

3  Thus  Judge  Cooley,  in  the  first  edition  of  his  *'  Constitutional  Limita- 
tions," published  soon  after  the  adoption  of  the  amendment,  says,  p.  294:  — 

"The  most  important  clause  in  the  Fourteenth  Amendment  is  that  part 
of  section  1  which  declares  that  all  persons  born  or  naturalized  in  the 
United  States  and  subject  to  the  jurisdiction  thereof,  are  citizens  of  the 
United  States  and  of  the  State  wherein  they  reside.  This  provision  very 
properly  puts  an  end  to  any  question  of  the  title  of  the  freedmen  and 
others  of  their  race  to  the  rights  of  citizenship;  but  it  may  be  doubtful 
whether  the  further  provisions  of  the  same  section  surround  the  citizen 
with  any  protections  additional  to  those  before  possessed  under  the  State 
constitutions.  But  as  a  principle  of  State  constitutional  law  has  now  been 
made  a  part  of  the  Constitution  of  the  United  States,  the  effect  will  be  to 
make  the  Supreme  Court  of  the  United  States  the  final  arbiter  of  cases 
in  which  a  violation  of  this  principle  by  State  laws  is  complained  of,  inas- 
much as  the  decisions  of  the  State  courts  upon  laws  which  are  sup- 
posed to  violate  it  will  be  subject  to  review  In  that  court  on  appeal." 


§    303  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       349 

a  disposition  iu  the  Supreme  Court  at  first  to  limit  the 
application  of  the  guaranties  of  due  process  of  law  and  the 
equal  protection  of  the  laws  to  the  protection-  of  th^  newly 
enfranchised  race  against  hostile  State  legislation.  Com- 
paratively few  cases  however  have  been  presented  wherein 
these  guaranties  have  been  invoked  for  the  protection  of 
the  class  for  whose  benefit  they  were  primarily  intended. 
The  gradual  judicial  recognition,  as  shown  in  the  opinions 
of  the  Supreme  Court,  of  the  broad  scope  of  these  provi- 
sions of  the  Fourteenth  Amendment  in  the  protection  of 
all  persons,  white  as  well  as  colored,  corporate  as  well  as 
individual,  against  any  discriminating  legislation,  is  a 
notable  illustration  of  the  developing  power  of  our  juris- 
prudence. 

§303.  Slaughter  Hovise  Cases. 

The  amendment  was  first  brought  before  the  Supreme 
Court,  in  the  Slaughter  House  Cases,  in  1873,  wherein  an 
act  of  the  State  of  Louisiana  granting  the  exclusive  right 
for  twenty-five  years  to  maintain  slaughter  houses  in  New 
Orleans  was  attacked  as  a  monopoly,  which,  it  was  claimed, 
violated  the  privileges  and  immunities  of  citizens  of  the 
United  States,  and  deprived  them  of  their  liberty  and  prop- 
erty without  due  process  of  law.  The  court,  in  a  notable 
opinion  by  Justice  Miller, i  held  that  the  privileges  and  im- 
munities of  citizens  of  the  United  States,  not  those  of  citi- 
zens of  the  State,  are  protected  by  the  amendment,  and  that 
the  privileges  and  immunities  thus  protected  are  those 
which  arise  out  of  the  nature  and  essential  character  of  the 
national  government.  The  argument  had  not  been  much 
pressed  in  the  cases,  that  the  charter  deprived  the  plaintiffs 


1  16  Wall.  36,  Chief  Justice   Chase  and  Justices  Field,  Swayne  and 
Bradley  dissenting. 


350       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   303 

of  their  property  without  due  process  of  law,  or  that  it  de- 
nied to  them  the  equal  protection  of  the  laws.  The  court 
said  as.-to  the  guaranties  of  the  amendment,  page  80 :  — 

"  The  first  of  these  paragraphs  has  been  in  the  Consti- 
tution since  the  adoption  of  the  Fifth  Amendment,  as  a 
restraint  upon  the  Federal  power.  It  is  also  to  be  found 
in  some  form  of  expression  in  the  constitutions  of  nearly 
all  the  States,  as  a  restraint  upon  the  power  of  the  States. 
This  law,  then,  has  practically  been  the  same  as  it  now  is 
during  the  existence  of  the  government,  except  so  far  as 
the  present  amendment  may  place  the  restraining  power 
over  the  States  in  this  matter  in  the  hands  of  the  Federal 
government."  : 

As  to  the  equal  protection  of  the  laws,  it  was  said, 
1.  c.  81:  — 

"  In  the  light  of  the  history  of  these  amendments,  and  the 
pervading  purpose  of  them,  which  we  have  already  dis- 
cussed, it  is  not  difficult  to  give  a  meaning  to  this  clause. 
The  existence  of  laws  in  the  States  where  the  newly  eman- 
cipated negroes  resided,  which  discriminated  with  gross 
injustice  and  hardship  against  them  as  a  class,  was  the  evil 
to  be  remedied  by  this  clause,  and  by  it  such  laws  are  for- 
bidden. 

"  If,  however,  the  States  did  not  conform  their  laws  to 
its  requirements,  then  by  the  fifth  section  of  the  article  of 
amendment.  Congress  was  authorized  to  enforce  it  by  suit- 
able leofislation.  We  doubt  verv  much  whether  auv  action 
of  a  State  not  directed  by  way  of  discrimination  against 
the  neo-roes  as  a  class,  or  on  account  of  their  race,  will  ever 
be  held  to  come  within  the  purview  of  this  provision.  It  is 
so  clearly  a  provision  for  that  race  and  that  emergency, 
that  a  strong  case  would  be  necessary  for  its  application  to 
any  other.  But  as  it  is  a  State  that  is  to  be  dealt  with,  and 
not  alone  the  validity  of  its  laws,  we  may  safely  leave  that 
matter  until    Congress  shall  have  exercised  its  power,  or 


§    304  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       351 

some  case  of  State  oppression,  by  deuial  of  equal  justice  in 
its  courts,  sliallhave  claimed  a  decision  at  our  hands.  We 
find  no  such  case  in  the  one  before  us,  and  do  not  deem  it 
necessary  to  go  over  the  argument  again,  as  it  may  have 
relation  to  this  particular  clause  of  the  amendment." 

In  a  later  case  from  West  Virginia,  where  the  Four- 
teenth Amendment  was  invoked  by  a  colored  man  on  account 
of  discrimination  against  negroes  in  the  summonino-  of 
jurors,  the  court  referred  to  the  opinion  in  the  Slaughter 
House  Cases,  saying:  "  If  this  is  the  spirit  and  meaning 
of  the  amendment,  whether  it  means  more  or  not,  it  is  to 
be  construed  liberally  to  carry  out  the  purpose  of  its 
framers."  ^ 

§  304.  Privileg-es  and  iminiiiiities    of   citizens  of  United 
States. 

As  vfill  be  seen  from  the  opinion  in  the  Slaughter  House 
Cases,  the  far-reaching  importance  of  the  last  clause  of 
the  first  section  of  the  amendment,  relating  to  "  due  pro- 
cess of  law"  and  the  "  equal  protection  of  the  laws,"  was 
not  then  realized,  nor  were  these  provisions  really  involved 
in  the  question  before  the  court,  which  turned  essentially 
upon  the  meaning  given  to  the  term  "  privileges  and  im- 
munities of  citizens  of  the  United  States,"  What  these 
are  has  not  been  definitely  decided,  although  in  subsequent 
cases  this  ruling  has  been  adhered  to.  It  was  said  in  one 
case  2  that  they  are  the  privileges  and  immunities  arising 
out  of  the  nature  and  essential  character  of  the  Federal 
government  and  granted  or  secured  by  the  Constitution 
of  the  United  States.  It  has  been  strongly  urged  that 
they  include  the  rights  guaranteed  by  the^ first  eight  amend- 
ments of   the  Constitution  which  prescribe  limitations  to 

1  Strauder??.  West  Virginia,  100  U.  S.  303. 

2  Duncan  v.  Missouri,  152  U.  S.  382  and  cases  cited. 


352       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   305 

Federal  power,  sucli  as  the  guaranty  of  the  right  to  trial 
by  jury  and  the  securities  against  unreasonable  searches  and 
seizures,  compulsory  self-incrimination,  quartering  soldiers 
on  the  people  in  time  of  peace,  excessive  bail  and  cruel 
or  unusual  punishments.  It  has  been  said  that  if  the 
rights  of  Federal  citizenship  include  only  those  protected 
by  the  express  and  implied  guaranties  of  the  Constitu- 
tion, such  as  free  access  to  the  seat  of  government,  the 
right  to  the  protection  of  the  government  on  the  high 
seas  or  in  foreign  parts  and  the  right  to  use  the  navigable 
waters  of  the  United  States,  that  these  rights  are  all  protected 
against  hostile  State  action  and  do  not  require  the  guaranty 
of  this  amendment.  Thus  Judge  Cooley  remarks:^  "It 
may  well  be  questioned  whether  the  provision  just  consid- 
ered was  necessary.  It  is  certainly  not  clear  that  there  can 
exist  any  privilege  or  immunity  of  a  citizen  of  the  United 
States  which,  independent  of  the  Fourteenth  Amendment, 
is  not  beyond  State  control."  But  he  adds  that  the  pro- 
vision has  its  importance  in  the  fact  that  it  embodies  in 
express  law  what  before,  to  some  extent,  rested  in  implica- 
tion merel}^^ 

§  305.  Construction  of  amendment. 

But  the  distinction  between  the  privileges  and  immuni- 
ties of  the  citizens  of  the  State  and  those  pertaining  to 
national  citizenship  is  not  material  in  the  consideration 
of  the  limitations  upon  the  State's  taxing  power  under 
this  amendment. 


1  Principles  of  Constitutional  Law,  247. 

2  In  O'Neil  v.  Vermont,  144  U.  S.  3G1,  Mr.  Justice  Field  said  in  tbe 
dissenting  opinion,  concurred  in  by  Justices  Harlan  and  Brewer,  that 
after  much  reflection  he  thought  that  the  privileges  and  immunities  of 
citizens  of  the  United  States  are  such  as  have  their  recognition  in  or 
guaranty  from  the  Constitution  of  the  United  States;  that  the  rights  of 
persons  declared  or  recognized  in  the  amendments  are  rights  belonging 


§   305  FOURTEENTH  AMENDMENT  AND  STATE    TAXATION.      353 

The  Fourteenth  Amendment  creates  no  rights ;  it  only 
extends  the  guaranty  of  Federal  protection  to  the  rights 
already  existing,  whatever  their  origin,  whether  created  by 
the  State  or  not.  All  property  rights  whatsoever  are  pro- 
tected by  the  guaranty  of  due  process  of  law  and  the 
equal  protection  of  the  laws.  The  comparative  impor- 
tance of  the  provisions  of  this  first  section  of  the  Four- 
teenth Amendment  is  illustrated  by  the  fact  that 
comparatively  few  cases  have  come  before  the  Supreme 
Court  on  the  question  of  the  distinction  between  State  and 
Federal  citizenship,  while  the  docket  has  been  crowded  with 
those  involving  the  questions  of  due  process  of  law  and  the 
equal  protection  of  the  laws.  Only  five  years  after  the 
Shiughter  House  decision  Justice  Miller  in  delivering  the 
opinion  of  the  court  ^  contrasted  the  "  due  process  of  law 
under  the  Fifth  and  Fourteenth  Amendments,  "  saying:  — 

"It  is  not  a  little  remarkable,  that  while  this  provision 
(due  process  of  law)  has  been  in  the  Constitution  of  the 
United  States,  as  a  restraint  upon  the  authority  of  the 
Federal  government,  for  nearly  a  centmy,  and  while,  during 
all  that  time,  the  manner  in  which  the  powers  of  that  govern- 
ment have  been  exercised  has  been  watched  with  jealousy,, 
and  subjected  to  the  most  rigid  criticism  in  all  its  branches, 
this  special  limitation  upon  its  powers  has  rarely  been  in- 
voked in  the  judicial  forum  or  the  more  enlarged  theater 
of  public  discussion.  But  while  it  has  been  a  part  of  the 
Constitution,  as  a  restraint  upon  the  power  of  the  States, 
only  a  very  few  years,  the  docket  of  this  court  is  crowded 

to  them  under  the  Constitution ;  and  the  Fourteenth  Amendment,  as  to 
all  such  rights,  places  a  limit  upon  State  power  by  ordaining  that  no 
State  shall  malje  or  enforce  any  law  which  would  abridge  them.  In  this 
connection  see  the  argument  by  John  Randolph  Tucker  in  the  case  of  the 
Chicago  Anarchists,  Spies  v.  Illinois,  123  U.  S.  131;  and  an  interesting 
discussion  by  Mr.  W.  B.  Guthrie  in  his  lectures  on  the  Fourteenth 
Amendment,  pp.  62  to  65. 

1  Davidson  v.  New  Orleans,  96  U.  S.  97,  103. 

23 


354       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   306 

with  cases  in  which  we  are  asked  to  hold  that  State  courts 
and  State  legislatures  have  deprived  their  own  citizens  of 
life,  liberty,  or  property  without  due  process  of  law." 

During  the  twenty-five  years  that  have  passed  since  these 
words  were  written,  as  the  volumes  of  the  court's  opinions 
will  show,  not  a  term  has  passed  in  which  some  question 
involving  due  process  of  law  or  the  equal  protection  of  the 
laws  has  not  been  before  the  court  for  adjudication. 

§  306.   Amendment  applies  only  to  State  action. 

It  has  been  uniformly  held  that  the  prohibitions  of  the 
Fourteenth  Amendment  are  addressed  only  to  the  States, 
and  have  no  reference  to  individual  invasion  of  private 
rights.  It  is  under  this  amendment  as  under  the  clause  of 
the  Constitution  prohibitiiig  State  impairment  of^  the  obli- 
gation of  contracts,  the  Federal  law  can  be  invoked  only 
where  the  action  is  by  the  State  or  under  State  authority. 

But  while  this  is  true,  yet  the  protection  can  be  obtained, 
not  against  the  political  body  called  a  State,  but  against 
any  agency  thereof,  against  any  organization,  association, 
of&cial  or  individual  acting  under  State  authority.  Thus 
the  Supreme  Court  said  :  ^  — 

"  A  State  acts  by  its  legislative,  its  executive,  or  its  judi- 
cial authorities.  It  can  act  in  no  other  way.  The  consti- 
tutional provision,  therefore,  must  mean  that  no  agency  of 
the  State,  or  of  the  officers  or  agents  by  whom  its  powers 
are  exerted,  shall  deny  to  any  person  within  its  jurisdiction 
the  equal  protection  of  the  laws.  Whoever,  by  virtue  of 
public  position  under  a  State  government,  deprives  another 
of  property,  life,  or  liberty,  without  due  process  of  law, 
or  denies  or  takes  away  the  equal  protection  of  the  laws, 
violates  the  constitutional  inhibition ;  and  as  he  acts  in  the 
name  and   for  the  State,  and  is  clothed  with  the  State's 

1  Ex  parte  Virginia,  100  U.  S.  339,  347. 


§   307  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       355 

power,  his  act  is  that  of  the  State.  This  must  be  so,  or 
the  constitutional  prohibition  has  no  meaning.  Then  the 
State  has  clothed  one  of  its  agents  with  power  to  annul  or 
to  evade  it." 

The  prohibitions  of  the  amendment  refer  to  all  the 
instrumentalities  and  authorities  of  the  State.  Thus  a. 
municijxd  ordinance  enacted  under  legislative  authority 
has  the  force  of  law  in  the  municipality  and  is  there- 
fore State  action  within  the  prohibition  of  the  amend- 
ment. Whatever  the  agency,  where  one  acts  in  the 
name  of  or  for  the  State,  his  act  is  that  of  the 
State. 

This  does  not  mean  however  that  an  erroneous  decision 
of  a  State  court,  whereby  the  unsuccessful  party  loses  his 
property ,  deprives  him  of  such  property  without  due  pro- 
cess of  law,  where  he  has  had  a  full  hearinoj  according  to 
the  regular  course  of  judicial  proceedings.! 

§  307.  Protection  not  limited  to  citizens. 

The  broad  application  of  the  guaranties  of  due  process 
of  law  and  the  equal  protection  of  the  laws  is  not  confined 
to  the  protection  of  citizens,  whether  considered  in  relation 
to  State  or  national  citizenship.  It  extends  to  all  persons, 
citizens  and  aliens,  our  own  people  and  the  strangers  within 
our  gates.     This  was  the  decision  of  the  Supreme  Court  in 

a  California  case,^  where  it  was  held  that  Chinamen  livino-. 

o 

in  this  country  under  provisions  of  the  treaty  were  entitled 
to  the  protection  of  the  Fourteenth  Amendment ;  and  the 
court  said  that  the  provisions  guaranteeing  due  process  of 
hiw  and  equal  protection  of  the  laws  are  "  universal  in  their 
application  to  all  persons  within  the  territorial  jurisdiction, 

1  Central  Land  Co.  v.  Laidley,  159  U.  S.  103;  Arrowsmith  v.  Harmon- 
ing,  118  U.S.  194. 

2  Yick  Wo  i>.  Hopkins,  118  U.  S.  356,  369. 


35^      FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.   §   308 

without  regard  to  any  differences  of  race,  of  color,  or  of 
nationality,  and  the  equal  protection  of  the  laws  is  a  pledge 
of  the  protection  of  equal  laws  "  to  all. 

§  308.   Corporations    are    '*  persons "    under  Fourteenth 
Amendment. 

It  was  not  until  1886, ^  in  the  case  of  Santa  Clara  County 
V.  Southern  Pacific  Railroad  Company ,2  that  it  was  defi- 
nitely determined  by  the  Supreme  Court  that  corporations 
are  persons  within  the  provisions  of  the  Fourteenth  Amend- 
ment and  are  therefore  entitled  to  "  due  process  of  law" 
and  to  the  "  equal  protection  of  the  laws." 

Mr.  Chief  Justice  Waite  said,  "The  court  does  not  wish 
to  hear  argument  on  the  question  whether  the  provision  in 
the  Fourteenth  Amendment  to  the  Constitution,  which  for- 
bids a  State  to  deny  to  any  person  within  its  jurisdiction  the 
equal  protection  of  the  laws,  applies  to  these  corporations. 
We  are  all  of  opinion  that  it  does.'.' 

In  a  recent  case^  the  court  said :  — 

* '  It  is  well  settled  that  corporations  are  persons  within 
the  provisions  of  the  Fourteenth  Amendment  of  the  Consti- 
tution of  the  United  States.  The  rights  and  securities 
guaranteed  to  persons  by  that  instiniment  cannot  be  disre- 
garded in  respect  to  these  artificial  entities  called  corpora- 
tions, any  more  than  they  can  be  in  respect  to  the  individ- 

^  It  had  been  assumed  however,  though  not  expressly  decided,  iu 
Eailroad  Co.  v.  Eichmond,  96  U.  S.  529  (1877). 

2  118  U.  S.  394.  This  had  been  already  decided  in  the  U.  S.  Circuit 
Court  of  California  in  an  elaborate  opinion  by  Justices  Field  and 
Sawyer,  18  Fed.  Eep.  385,  and  9  Sawyer  165,  210.  The  ruling  has 
been  in  many  cases  aflBrmed:  Pembina  Mining  Co.  v.  Pennsylvania,  125 
U.  S.  181;  Gulf,  Colorado  &  Santa  Fe  E.  E.  Co.  v.  Ellis,  165  U.  S.  154 
and  cases  cited;  Minneapolis  v.  Beckwith,  129  U.  S.  26;  Charlotte,  etc., 
E.  E.  Co.  V.  Gibbes,  142  U.  S.  386 ;  Waters  Pierce  Oil  Co.  v.  Texas,  177 
U.  S.  28. 

3  165  U.  S.  154. 


§  309  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       357 

uals  who  are  the  equitable  owners  of  the  propert}^  belonffino- 
to  such  corporations.  A  State  has  no  more  power  to  deny- 
to  corporations  the  equal  protection  of  the  laws  than  it  has 
to  individual  citizens." 

This  right  of  the  corporation,  whether  domestic  or 
foreign,  to  due  process  of  law  and  the  equal  protection  of 
the  laws  does  not  affect  the  power  of  the  State  to  exclude 
foreign  corporations,  other  than  those  directly  engaged  in 
interstate  commerce  or  in  the  employ  of  the  Federal 
government,  or  to  prescribe  such  conditions  by  way  of 
license  charges  or  otherwise  as  it  may  deem  proper  to  im- 
pose upon  their  admission  to  do  business  in  the  State. 
But  the  effect  of  it  is  that,  when  admitted,  they  are  entitled 
to  the  protection  of  these  constitutional  guaranties  equally 
with  others.  1 

§  309.  *<  Any  person  "  and  "  any  person  witMn  the  juris- 
diction "  distinguished. 

It  will  be  noted  that  there  is  a  difference  in  the  language 
of  the  two  prohibitions.  A  State  must  not  deprive  ani/ 
person  of  life,  liberty  or  property  without  due  process  of 
law,  but  the  clause  forbidding  denial  of  the  equal  protection 
of  the  laws  is  limited  to '' any  ]yeTson  2int/mi  its  Jimsdic- 
tion.''  The  Supreme  Court  said  in  a  recent  case  2  that  it 
could  not  assume  that  these  words  ' «  within  its  jurisdiction  ' ' 
were  inserted  in  this  connection  without  any  object,  nor  was 
it  at  liberty  to  eliminate  them  from  the  Constitution  and 
interpret  the  clause  in  question  as  though  they  were  not 
to  be  found  in  that  instrument,  though  it  did  not  attempt 
to  state  what  is  their  full  import.  It  held  however  that 
where  a  Virginia  corporation  had  sold  goods  to  a  corporation 
in  Tennessee  which  subsequently  became  insolvent,    and 

1  See  supra,  §  168. 

2  Blake  v.  McClung,  172  U.  S.  239,  261. 


358       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   310 

had  never  been  admitted  to  do  business  in  Tennessee  under 
conditions  subjecting  it  to  process  issuing  from  the  courts 
of  that  State,  the  vendor  was  not  under  this  chiuse  within 
the  jurisdiction  of  the  State  of  Tennessee,  and  could  not 
therefore  claim  the  equal  protection  of  the  laws  under  the 
Fourteenth  Amendment,  in  the  distribution  of  the  assets  of 
the  insolvent  purchaser. 

§  310.  Application  of  amendiuent  to  State  taxation. 

The  first  application  of  the  amendment  to  taxation  was 
by  the  legislative  department  of  the  government  in  the  Act 
of  Congress  of  May  31,  1870,  which  has  ever  since  been 
on  the  statute  book  as  section  1977,  Revised  Statutes  of 
the  United  States..     The  act  provides  as  follows : — 

"  All  persons  within  the  jurisdiction  of  the  United  States 
shall  have  the  same  right  in  every  State  and  Territory  to 
make  and  enforce  contracts,  to  sue,  be  parties,  give  evi- 
dence, and  to  the  full  and  equal  benefit  of  all  laws  and  pro- 
ceedings for  the  security  of  persons  and  property  as  is 
enjoyed  by  white  citizens  and  shall  be  subject  to  like 
punishment,  pains,  penalties,  taxes,  licenses,  and  exactions 
of  every  hind,  and  to  no  other." 

This  act  was  passed  under  the  authority  of  the  fifth  section 
of  the  amendment  providing  that  "  Congress  shall  have 
power  to  enforce  by  appropriate  legislation  the  provisions 
of  this  article."  It  was  a  constitutional  exercise  of  the 
power  of  Congress  under  the  Fourteenth  Amendment, i 
as  it  is  directed  against  State  and  not  individual  action.  The 
legislative  prohibition,  it  will  be  seen,  is  aimed  directly  at 
discriminations  against  the  colored  race,  declaring  that  all 
persons  shall  be  subject  to  the  same  taxation  as  white 
citizens. 


1  Strauder  B.  West  Virginia,  100  U.  S.  303;  Neal  v.  Delaware,  103  U.  S. 
370,  p.  385. 


§  310  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       359 

The  comprehensive  character  of  the  constitutional 
guaranties  and  tlieir  application  to  discriminating  taxation 
was  first  judicially  recognized  in  two  notable  opinions  of 
Justice  Field  of  the  Supreme  Court,  sitting  in  the  Circuit 
Court  of  California,  and  one  by  Circuit  Judge  Jackson, 
afterwards  Justice  of  the  Supreme  Court,  in  the  Northern 
District  of  Ohio.  The  first  case  was  a  suit  brought 
to  recover  of  the  Southern  Pacific  Eailroad  Company 
State  and  county  taxes  for  the  years  1880  and  1881, 
and  the  defense  was  set  up  that  the  assessment,  under  the 
newly  adopted  constitution  of  California,  which  allowed  a 
deduction  from  other  i)roperty  for  mortgages  thereon  but 
forbade  such  deduction  from  railroad  property,  was  an  un- 
just and  unlawful  discrimination  conflicting  with  the  Four- 
teenth Amendment.  The  suit  was  brought  in  the  State 
court  and  removed  to  the  United  States  court.  On  motion 
to  remand,  it  was  held  that  the  case  involved  a  Federal 
question,  the  law  at  that  time  permitting  a  removal  by  the 
defendant  on  that  ground. ^  On  the  trial  upon  the  merits 
the  assessment  was  adjudged  invalid  as  violative  of  the 
Fourteenth  Amendment  by  Justice  Field,  Justice  Sawyer 
concurring.  2 

In  the  followmg  year,  another  case  involving  substan- 
tially the  same  question  was  before  the  same  court. ^ 
Justice  Field,  Justice  Sawyer  concurring,  held  these  assess- 
ments invalid  in  an  exhaustive  opinion,  which  is  an  im- 
portant contribution  to  the  constitutional  law  of  taxation. 
This  opinion,  though  delivered  on  the  circuit,  is  really  the 
foundation  opinion  concerning  the  broad  construction  of  the 

1  County  of  San  Mateo  v.  So.  Pac.  R.  R.  Co.,  13  Fed,  Rep.  145. 

2  13  Fed.  Rep.  722,  733. 

3  County  of  Santa  Clara  v.  So.  Pac.  R.  R.  Co.,  18  Fed.  Rep.  385,  397. 
This  judgment  was  affirmed  in  the  Supreme  Court  but  on  another  point, 
118  U.  S.  395,  the  court  holding  that  corporations  are  persons  within 
the  meaning  of  the  Fourteenth  Amendment,  supra.  But  see  the  opinion 
of  Justice  Field  in  the  Supreme  Court,  page  422. 


360      FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   311 

Fourteenth  Amendment  and  its  application  to  discriminating 
taxation. 

§  311.  Justice  Field  on  Fourteenth  Amendment  and  State 
taxation. 

He  said :  ' '  The  amendment  was  adopted  soon  after,  the 
close  of  the  civil  war  and  undoubtedly  had  its  origin  in  a 
purpose  to  secure  the  newly  made  citizens  in  the  full  enjoy- 
ment of  their  freedom.  But  it  is  in  no  respect  limited  in 
its  operation  to  them.  It  is  universal  in  its  application, 
extending  its  protective  force  over  all  men,  of  every  race 
and  color,  within  the  jurisdiction  of  the  States  throughout 
the  broad  domain  of  the  republic.  A  constitutionarpro- 
vision  is  not  to  be  restricted  in  its  application  because  de- 
signed originally  to  prevent  an  existing  wrong.  Such  a 
restricted  interpretation  was  urged  in  the  Dartmouth  College 
case,  to  prevent  the  apphcation  of  the  provision  prohibiting 
legislation  by  States  impairing  the  obligation  of  contracts 
to  the  charter  of  the  college,  it  being  contended  that  the 
charter  was  not  such  a  contract  as  the  prohibition  contem- 
plated. Chief  Justice  Marshall,  however,  after  obser\dng 
that  it  was  more  than  possible  that  the  preservation  of 
rights  of  that  description  was  not  particularly  in  view  of 
the  f ramers  of  the  Constitution  when  that  clause  was  intro- 
duced, said :  — 

"  '  It  is  not  enough  to  say  that  this  particular  case  was 
not  in  the  mind  of  the  convention  when  the  article  was 
framed,  nor  of  the  American  people  when  it  was  adopted. 
It  is  necessary  to  go  further  and  to  say  that,  had  this  par- 
ticular case  been  suggested,  the  language  would  have  been 
so  varied  as  to  exclude  it,  or  it  would  haA'e  been  made  a 
special  exception.  The  case  being  within  the  words  of  the 
rule  must  be  within  its  operation  likewise,  unless  there  be 
something  in  the  literal  construction  so  obviously  absurd  OT 
mischievous,   or  repugnant  to  the  general  spirit  of  the  in- 


§    311  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       361 

strument,  as  to  justify  those  who  expound  the  Constitution 
in  making  it  an  exception.'    4  Wheat.  644. 

"All  history  shows  that  a  particular  grievance  suffered 
by  an  individual  or  a  class,  from  a  defective  or  oppressive 
law,  or  the  absence  of  any  law,  touching  the  matter,  is  of- 
ten the  occasion  and  cause  for  enactments,  constitutional 
or  legislative,  general  in  their  character,  designed  to  cover 
cases  not  merely  of  the  same,  but  all  cases  of  a  similar, 
nature.  The  wrongs  which  were  supposed  to  be  inflicted 
upon  or  threatened  to  citizens  of  the  enfranchised  race,  by 
special  legislation  directed  against  them,  moved  the  framers 
of  the  amendment  to  place  in  the  fundamental  law  of  the 
nation  provisions  not  merely  for  the  security  of  those  citi- 
zens, but  to  insure  all  men,  at  all  times,  and  at  all  places, 
due  process  of  law,  and  the  equal  protection  of  the  laws. 
Oppression  of  the  person  and  spoliation  of  property  by  any 
State  were  thus  forbidden,  and  equality  before  the  law 
was  secured  to  all." 

After  quoting  from  Mr.  Edmunds,  who  was  a  member  of 
the  Senate  when  the  amendment  was  adopted  by  that  body, 
as  to  the  thorough  discussion  and  scrutiny  to  which  the 
language  of  the  amendment  was  subjected  before  adoption, 
the  opinion  proceeded :  — 

' '  With  the  adoption  of  the  amendment  the  power  of  the 
States  to  oppress  any  one  under  any  pretense  or  in  any 
form  was  forever  ended ;  and  henceforth  all  persons  within 
their  jurisdiction  could  claim  equal  protection  under  the 
laws.  And  by  equal  protection  is  meant  equal  security  to 
every  one  in  his  private  rights — in  his  right  to  life,  to  lib- 
erty, to  property,  and  to  the  pursuit  of  happiness.  It  im- 
plies not  only  that  the  means  which  the  laws  afford  for  such 
security  shall  be  equally  accessible  to  him,  but  that  no  one 
shall  be  subject  to  any  greater  burdens  or  charges  than  such 
as  are  imposed  upon  all  others  under  like  circumstances. 
This  protection  attends  everyone  everywhere,  whatever  be 


362       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   311 

his  position  in  society  or  his  association  with  others, 
either  for  profit,  improvement,  or  pleasure.  It  does  not 
leave  him  because  of  any  social  or  official  position  which 
he  may  hold,  nor  because  he  may  belong  to  a  political  body, 
or  to  a  religious  society,  or  be  a  member  of  a  commercial, 
manufacturing,  or  transportation  company.  It  is  the  shield 
which  the  arm  of  our  blessed  government  holds  at  all 
times  over  everyone,  man,  woman,  and  child,  in  all  its 
broad  domain,  wherever  they  may  go  and  in  whatever  re- 
lations they  may  be  placed.  No  State  —  such  is  the  sover- 
ei2:n  command  of  the  whole  people  of  the  United  States — no 
State  shall  touch  the  life,  the  liberty,  or  the  property  of  any 
person,  however  humble  his  lot  or  exalted  his  station,  with- 
out due  process  of  law;  and  no  State,  even  with  due  process 
of  law,  shall  deny  to  any  one  within  its  jurisdiction  the 
equal  protection  of  the  law. 

"Unequal taxation,  so  far  as  it  can  be  prevented,  is,  there- 
fore, with  other  unequal  burdens,  prohibited  by  the  amend- 
ment. There  undoubtedly  are,  and  always  will  be,  more 
or  less  inequalities  in  the  operation  of  all  general  legisla- 
tion arising  from  the  different  conditions  of  persons  from 
their  means,  business,  or  position  in  life,  against  which  no 
foresight  can  guard.  But  this  is  a  very  different  thing, 
both  in  purpose  and  effect,  from  a  carefully  devised  scheme 
to  produce  such  inequalit}';  or  a  scheme,  if  not  so  devised, 
necessarily  producing  that  result.  Absolute  equality  may 
not  be  attainable,  but  gross  and  designed  departures  from 
it  will  necessarily  bring  the  legislation  authorizing  it  within 
the  prohibition.  The  amendment  is  aimed  against  the 
perpetration  of  injustice,  and  the  exercise  of  arbitrary 
power  to  that  end.  The  position  that  unequal  taxation  is 
not  within  the  scope  of  its  prohibitory  clause  would  give  to 
it  a  singular  meaning.  It  is  a  matter  of  history  that  un- 
equal and  discriminating  taxation,  leveled  against  special 
classes,  has  been  the  fruitful  means  of  oppressions,  and  the 


§   oil  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       363 

cause  of  more  commotions  and  disturbance  in  society,  of 
insurrections  and  revolutions,  than  any  other  cause  in  the 
world.  It  would,  indeed,  as  counsel  in  the  San  Mateo  case 
ironically  observed,  be  a  charming  spectacle  to  present  to 
the  civilized  world,  if  the  amendment  were  to  read,  as  con- 
tended it  does  in  law :  '  Nor  shall  any  State  deprive  any 
person  of  his  property  without  due  process  of  law,  except 
it  be  in  the  form  of  taxation;  nor  deny  to  any  person  within 
its  jurisdiction  the  equal  protection  of  the  laws,  except  it 
be  by  taxation.'  No  such  limitation  can  be  thus  ingrafted 
by  implication  upon  the  broad  and  comprehensive  language 
used.  The  power  of  oppression  by  taxation  without  due 
process  of  law  is  not  thus  permitted ;  nor  the  power  by  tax- 
ation to  deprive  any  person  of  the  equal  protection  of  the 
laws." 

The  Justice  commented  on  the  fact  that  the  Act  of  Con- 
gress ^  expressly  provides  for  equality  of  taxation,  and 
proceeded :  — 

"  The  fact  to  which  counsel  allude,  that  certain  property 
is  often  exempted  from  taxation  by  the  States,  does  not  at 
all  militate  against  this  view  of  the  operation  of  the  Four- 
teenth Amendment,  in  forbidding  the  imposition  of  unequal 
burdens.  Undoubtedly,  since  the  adoption  of  that  amend- 
ment, the  power  of  exemption  is  nuich  more  restricted  than 
formerly ;  but  that  it  may  be  extended  to  property  used  for 
objects  of  a  public  nature  is  not  questioned,  —  that  is,  where 
the  property  is  used  for  the  promotion  of  the  public  well- 
being  and  not  for  any  private  end." 

After  stating  that  property  held  for  religious  and  educa- 
tional purposes  was  properly  exempted  from  taxation,  he 
continued :  — 

"  AVhatever  the  exemption,  it  can  only  be  sustained  for 
the  public  service  or  benefit  received.    The  equality  of  pro- 

1  See  aupra,  §  311. 


364       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §    312 

tection  which  the  Fourteenth  Amendment  declares  that  no 
State  shall  deny  to  any  one,  is  not  thus  invaded.  That 
amendment  requires  that  exactions  upon  property  for  the 
public  shall  be  levied  according  to  some  common  ratio  to 
its  value,  so  that  each  owner  may  contribute  only  his  just 
proportion  to  the  general  fund.  When  such  exaction  is 
made  without  reference  to  a  common  ratio,  it  is  not  a  tax, 
whatever  else  it  may  be  termed ;  it  is  rather  a  forced  con- 
tribution, amounting,  in  fact,  to  simple  confiscation." 

§  312.   Circuit   Judge    Jackson    on   Fourteenth   Amend- 
ment and  State  taxation. 

In  the  Ohio  case,i  Judge  Jaitkson  held  invalid  an  ordi- 
nance providing  for  street  improvements  in  the  city  of 
Toledo,  not  only  on  the  ground  that  it  involved  the  taking 
of  property  without  compensation  first  paid  to  the  owner, 
but  also  because  it  authorized  a  special  assessment  without 
notice  or  opportunity  to  be  heard,  which  was  a  taking  of 
property  without  due  process  of  law.  The  court  declared 
that  the  Fourteenth  Amendment  was  intended  to  place  the 
same  limitation  upon  the  power  of  the  State  which  the 
Fifth  Amendment  had  placed  upon  the  power  of  the 
Federal  government,  and  that  the  same  application  was 
made  in  the  matter  of  taxation.  It  is  no  longer  an  open 
question  that  the  provisions  of  the  Federal  Constitution, 
prohibiting  the  State  from  depriving  any  person  of  his  prop- 
erty without  due  process  of  law,  apply  to  taxation  by  the 
State  or  by  its  subordinate  agencies,  and  that,  with  resj^ect 
to  all  such  taxes  based  on  values  and  apportionment  and 
involving  judicial  or  quasi  judicial  ascertainment  and  de- 
termination as  to  the  amount  to  be  imposed  upon  the  citi- 
zen or  made  a  charge  upon  his  property,  due  process  of 
law  demands  and  requires   that  at  some    stage  in  the   pro- 

1  Scott  V.  Toledo,  86  Fed.  Rep.  385. 


§   313  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       365 

ceeding,  before  the  tax  charge  is  fixed  and  made  final  and 
collected,  he  shall  have  notice  or  an  opportunity  to  be 
heard  in  reference  thereto. 


§  313.   "  Due  process  of  law"  and  *'  the  equal  protection 
of  the  laws  '*  distinguished. 

The  requirement  of  "  due  process  of  law  "  or  its  legal 
equivalent  "the  law  of  the  land,"  in  its  broader  sense, 
may  include  all  that  is  connoted  by  ' '  equal  protection  of 
the  laws."  One  who  is  injured  by  arbitrary  or  class  legis- 
lation may  justly  claim  that  he  is  deprived  of  his  property 
without  due  process  of  law,  and  so  the  term  "  due  process 
of  law  ' '  in  State  constitutions  has  been  held  to  involve  the 
prohibition  of  class  legislation.^ 

The  Supreme  Court  has  not  defined  either  "  due  process 
of  law  "  or  the  "  equal  protection  of  the  laws."  As  to  the 
former  phrase,  it  said,^  1.  c.  p.  101:  "It  must  be  con- 
fessed, however,  that  tlie  constitutional  meaning  or  value 
of  the  phrase  '  due  process  of  law,'  remains  to-day  with- 
out that  satisfactory  precision  of  definition  which  judicial 
decisions  have  given  to  nearly  all  the  other  guaran- 
tees of  personal  rights  found  in  the  constitutions 
of  the  several  States  and  of  the  United  States." 
Apart  from  the  imminent  risk  of  a  failure  to  give  any 
definition  which  would  be  at  once  perspicuous,  comprehen- 
sive and  satisfactory,  there  was  wisdom  in  ascertaining  the 
intent  and  application  of  such  an  important  phrase  in  the 
Federal  Constitution  by  the  gradual  process  of  judicial 
inclusion  and  exclusion,  as  the  cases  presented  for  decision 
should  require,  with  the  reasoning  on  which  such  decisions 
might  be  founded.     The  court  ^  has    recently  declared  that 

^  Sheppard  v.  Johnson,  2  Humphrey  285;  Sutton  v.  Hate,  96  Tenn. 
710. 

2  Davidson  v.  New  Orleans,  96  U.  S.  97,  decided  in  1877. 

3  Ilolden  «.  Hardy,  1G9  U.  S.  389. 


36(3       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   313 

it  had  never  attempted  to  define  with  precision  the  words 
•'due  process  of  law." 

So  also  the  court  has  declined  to  define  with  precision 
what  is  the  "  equal  protection  of  the  laws,"  though  it  is 
said  that  the  equal  protection  of  the  laws  is  the  pledge  of 
the  protection  of  equal  laws.i  And  in  a  very  recent  case, 
holding  invalid  the  anti-trust  law  of  Illinois,^  the  court 
has  repeated  that  both  these  two  guaranties  are  secured 
if  the  laws  operate  on  all  alike  and  do  not  subject  the 
individual  to  an  arbitrary  exercise  of  the  powers  of  gov- 
ernment. 

But  there  has  been  a  practical  distinction  observed  in  the 
application  of  the  terms,  which  for  convenience  may  be 
followed  in  analyzing  the  decisions.  Due  process  of  law 
is  required  in  tax  procedure,  in  the  assessment  and  collec- 
tion of  taxes;  and,  in  a  broader  sense,  the  taking  of  prop- 
erty by  taxation  under  due  process  of  law  requires  that  the 
tax  must  be  made  for  a  lawful,  that  is  for  a  public, 
purpose.  On  the  other  hand,  the  equal  protection  of 
the  laws  involves  the  question  of  what  is  a  reasonable  classi- 
fication for  taxation,  in  other  words,  to  what  extent 
equality  of  taxation  is  protected  by  the  Federal  power 
imder  the  Fourteenth  Amendment. 

The  practical  distinction  between  due  process  of  law  and 
the  equal  protection  of  the  laws  is  illustrated  in  a  recent 
case  in  the  Supreme  Court,  which  is  not  however  con- 
cerned with  taxation.  In  Cotting  v.  Kansas  City  Stock 
Yards,  ^  the  act  of  the  State  of  Kansas,  regulating  charges 
in  public  stockj^ards  and  applying  only  to  the  defendant 
corporation  and  not  to  other  companies  or  corporations 
engaged  in  like  business,  was  adjudged  to  be  in  violation 

1  Yick  Wo  V.  Hopkins,  118  U.  S.  356,  369. 

2  Connolly  v.  Union  Sewer  Pipe  Co.,  22  Sup.  Ct.  Rep.  431,  decided 
March,  1902. 

3  183  U.  S.  79. 


§   314  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       367 

of  the  Fourteenth  Amendment.  The  opmion  of  Justice 
Brewer,  with  whom  concurred  Chief  Justice  Fuller  and 
Justice  Peckham,  was  that  the  unreasonable  rates  imposed 
and  the  extreme  and  cumulative  penalties,  constituted  a 
deprivation  of  property  without  due  process  of  law ;  while 
the  remaining  six  Justices,  Harlan,  Gray,  Brown,  White, 
Shiras  and  McKenna,  concurred  only  in  the  second  ground 
on  which  the  decision  was  based,  that  the  discrimination  in 
the  legislation,  directed,  as  it  was,  against  the  defendant 
company  alone,  constituted  a  denial  of  the  equal  protection 
of  the  laws.  In  other  words,  the  arhitrary  classification 
constituted  a  denial  of  the  equal  protection  of  the  laws,  and 
these  latter  judges  expressed  no  opinion  upon  the  point 
whether  the  statute  by  its  necessary  qperation  would  deprive 
the  company  of  its  property  without  due  process  of  law. 

§  314.  Fourteenth  Ainendment  in  State  courts. 

"While  the  Federal  government  makes  this  guaranty  of 
protection  under  the  Fourteenth  Amendment  against  the 
action  of  the  State  government  or  any  one  acting  under 
State  authority,  it  is  an  anomalous  fact,  illustrative  of  the 
dual  sovereignty  in  our  form  of  government  and  the  com- 
plex character  of  our  jurisprudence,  that  the  final  determi- 
nation of  questions  of  the  violation  of  the  amendment 
does  not  always  rest  with  the  Federal  courts.  Thus,  under 
our  peculiar  judicial  system,  wherein  the  Federal  courts  in 
cases  of  adverse  citizenship  administer  State  laws  and  fol- 
low, as  a  rule,  the  decisions  of  the  State  wherein  they  have 
jurisdiction,  the  State  courts  also,  in  the  la^^'ful  exercise  of 
their  powers,  may  decide  Federal  questions  when  presented 
for  judgment,  and  their  decisions  may  be  final.  Thus  if  a 
Federal  right  or  immunity  is  claimed  in  a  case  before  a 
State  court,  and  the  judgment  of  the  highest  court  having 
jurisdiction  in  the  State  is  in  favor  of  the  claimant,  that 
decision  of  the  State  court  is  final  and  cannot  be  reviewed 


368       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   314 

on  writ  of  error  by  the  Supreme  Court.  This  is  because 
the  Judiciary  Act  of  17891  limits  the  appelhite  jurrsdiction 
of  the  Supreme  Court,  in  reviewing  decisions  of  the  highest 
courts  of  the  States,  to  cases  where  the  decision  is  against 
the  Federal  right,  privilege  or  exemption  claimed.  In  a 
number  of  cases  therefore  arising  under  the  Fourteenth 
Amendment,  decisions  of  State  courts  have  been  rendered, 
sustaining  the  claim  of  Federal  right  or  exemption  and 
adjudging  State  statutes  to  be  invalid;  and  when  these 
decisions  involve  the  construction  and  application  of  the 
amendment,  they  are  final  within  that  jurisdiction.  This 
power  of  the  State  courts  exists,  whatever  the  nature  of 
the  Federal  right  or  claim,  whether  under  the  Fourteenth 
Amendment  or  otherwise. 

An  interesting  illustration  of  this  jurisdiction  of  the 
State  courts  to  construe  the  Federal  Constitution  is  found 
in  a  recent  case  in  Missouri. ^  A  constitutional  amendment, 
duly  ratified  by  the  people,  adopted  what  is  known  as  the 
California  plan  of  taxing  mortgages  as  part  of  the  real 
estate,  allowing  a  deduction  of  the  value  of  the  mortgage 
to  the  owner,  except  in  the  case  of  railroads.  The  Supreme 
Court  of  the  State  held  that  this  amendment  violated  the 
Fourteenth  Amendment  of  the  Constitution  of  the  United 
States,  because  the  exemption  was  an  arbitrary  classifica- 
tion. As  the  decision  was  thus  in  favor  of  the  Federal 
immunity  claimed  in  the  suit,  the  decision  of  the  State 
court,  construing  the  Constitution  of  the  United  States, 
was  final. 

The  same  provision  in  the  California  constitution  had 
been  held  by  the  Supreme  Court  of  that  State  to  be  valid 
and  not  violative  of  the  Fourteenth  Amendment. ^  Thus 
by  the  decisions  of  the  State  courts  construing  the  Federal 

1  1  U.  S.  Statutes  at  Large,  Chapter  20,  section  25. 

2  Russell  V.  Croy,  164  Mo.  69. 

3  See  Railroad  Co.  v.  Board  of  Equalization,  60  Cal.  35. 


§   315  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       369 

Constitution,  the  same  system  of  taxation  was    held  valid 
in  one  State  and  invalid  in  another. 


§  315.   Substance    and    not    form     regarded   in    alleged 
violations  of  Fourteentli  Amendment. 

In  determining  whethei*  the  Fourteenth  Amendment  has 
been  disregarded  by  any  of  the  agencies  of  the  State,  sub- 
stance and  not  form  merely  will  be  considered.  It  was 
said  in  a  condemnation  case  i  that  the  mere  fact  of  notice 
and  opportunit}^  for  hearing  does  not  necessarily  decide  the 
question  as  to  whether  there  was  due  process  of  law.  "  A 
State  may  not,  by  any  of  its  agencies,  disregard  the  pro- 
hibitions of  the  Fourteenth  Amendment.  The  judicial 
authorities  may  keep  within  the  letter  of  the  statute,  pre- 
scribing forms  of  procedure  in  the  courts,  and  give  the 
parties  interested  the  fullest  opportunity  to  be  heard,  and 
yet  it  might  be  that  its  final  action  would  be  inconsistent 
with  that  amendment."  The  State  cannot  make  anything 
due  .process  of  law  which  by  its  own  legislation  it  chooses 
to  declare  such.  There  must  be  "  due  process  "  in  sub- 
stance as  well  as  in  form. 

On  the  other  hand,  the  court  has  uniformly  insisted  that 
there  must  be  a  substantial  failure  to  afford  due  process  of 
law  or  the  equal  protection  of  the  laws,  before  it  will 
interfere  especially  with  the  taxing  system  established 
by  the  State.  Essentials  and  non-essentials  are  carefully 
distinguished. 2  Courts  are  always  reluctant  to  interfere 
with  the  taxing  system  established  by  legislative  authority, 
and  it  has  been  repeatedly  held  that  this  applies  with 
especial  force  to  the  Federal  Supreme  Court  in  its  jurisdic- 
tion under  this  amendment.     It  must  clearly  appear  that 


1  Chicago,  Burlington  &  Q.  R.  R.  Co.  v.  Chicago,  166  U.  S.  226,  235. 
"  Castillo  V.  McConnico,  168  U.  S.  674.     See  infra,  §  338. 


370       FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.    §   316 

what  the  State  is  attempting  to  do  violates  the  constitu- 
tional rights  of  the  property  owners. i 

§  316.  Fourteenth    Amendment     in     condemnation     for 
public  purposes. 

The  power  to  condemn  private  property  for  public  uses 
is  closely  analogous  to  the  power  of  taxation,  and  the 
broadened  construction  of  the  Fourteenth  Amendment  is 
illustrated  in  the  decisions  of  the  Supreme  Court  relative 
to  its  application  to  the  exercise  by  the  States  x)f  the  former 
power.  The  Fifth  Amendment  to  the  Constitution,  which, 
as  above  stated,  applies  only  to  the  Federal  government, 
provides  not  only  that  no  person  shall  be  deprived  of  life, 
liberty  or  property  without  due  process  of  law,  but  also  that 
private  property  shall  not  be  takenf  or  public  use  without  just 
compensation.  In  Davidson  v.  New  Orleans,  swpra,  §  306, 
decided  in  1877,  Justice  Miller,  in  delivering  the  opinion 
of  the  court,  commented  upon  the  fact  that  these  words 
relating  to  the  taking  of  private  property  for  public  uses, 
which  are  in  immediate  juxtaposition  in  the  Fifth  Amend- 
ment, are  left  out  of  the  Fourteenth. 2 

In  the  California  irrigation  case  in  1896,3  the  court  again 
referred  to  this  omission,  saying  that  the  States  are  not 
specifically  prohibited  by  the  Federal  Constitution  from  tak- 
ing private  property  for  any  but  a  public  use.  But  it  is 
claimed,  said  the  court,  that  the  citizen  is  deprived  of  his 
property  without  due  process  of  law,  if  it  be  taken  by  or 
under  State  authority  for  any  other  than  a  public  use  either 
under  the  power  of  taxation  or  the  right  of  eminent 
domain. 

But  later  at  the  same  term,  in  a  condemnation  case,*  the 

1  King  V.  Mullins,  171  U.  S.  404. 

2  But  see  remarks  of  Justice  Bradley  in  this  case,  p.  107. 

3  Fallbrook  Irrigation  Districts.  Bradley,  164  U.  S.  112,  1.  c.  158. 

*  Chicago,  Burlington  ^  Quincy  R.  R.  Co.  v.  Chicago,  166  U.  S.  226. 


§   316  FOURTEENTH  AMENDMENT  AND  STATE  TAXATION.       371 

court  held  unanimously  that  due  process  of  law  under  the 
Fourteenth  Amendment  does  protect  the  citizen  in  pro- 
ceedings for  condemnation,  and  requires  not  only  that  the 
use  should  be  public,  but  that  just  compensation  should  be 
paid.  It  said,  1.  c.  241,  that  a  judgment  of  the  State  court, 
even  if  it  be  authorized  by  statute,  whereby  private  prop- 
erty is  taken  by  the  State,  or  under  its  direction,  for  public 
use,  without  compensation  made  or  secured  to  the  owner, 
is  upon  principle  and  authority  wanting  in  the  due  process 
of  law  required  by  the  Fourteenth  Amendment  to  the 
Constitution,  and  the  affirmance  of  such  judgment  by  the 
highest  court  of  the  State  is  a  denial  by  that  State  of  the 
right  secured  to  the  owner  by  that  instrument. 


CHAPTER     XI. 

DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE. 

§  317.  Due  process  of  law  is  "  the  law  of  the  land." 

318.  Due  process  of  law  in  taxation  does  not  require  judicial  hearing. 

319.  Notice  and  hearing  not  required  in  cases  of  licenses,  etc. 

320.  Hearing  not  required  where  valuation  is  fixed  by  taxpayer. 

321.  Where  amount  of  tax  is  dependenton  valuation,  bearingis  required. 

322.  Notice  and  hearing  in  inheritance  taxes. 

323.  Rehearing  or  appeal  to  courts  not  required  in  valuation. 

324.  Ruling  of  State  court  that  hearing  is  required  is  conclusive. 

325.  Personal  notice  of  fixed  public  session  of  revision  boards  not 

required. 

326.  Provision  for  notice  may  be  implied. 

327.  Distinction  between  assessments  for  general  and  special  taxation. 

328.  Notice  by  publicatiou. 

329.  Due  process  satisfied  by  opportunity  for  hearing  at  any  stage  of 

proceeding. 

330.  Collection  of  taxes  through  summary  proceedings. 

331.  Collection  of  taxes  through  distraint  and  seizure. 

332.  Legislative  discretion  in  imposing  penalties  on  delinquents. 
383.  Plenary  power  of  State  in  assessments  and  re -assessments. 

334.  Legislative  legalization  of  defective  assessment  held  void. 

335.  Forfeiture  of  lands  for  taxes. 

336.  New  remedies  for  collection  of  taxes  may  be  adopted. 

337.  Effect  of  statutory  conclusiveness  of  lax  deeds. 

338.  Essentials  only  considered  as  to  due  process  of  law  in  tax  pro- 

cedure. 

339.  Limitation  and  curative  statutes. 

§  317.  Due  process  of  law  is  *'tlie  law  of  the  land." 

"  The  prohibition  against  depriving  the  citizen  or  subject 
of  his  life,  libert}',  or  propertj^  without  clue  process  of  law," 
said  Justice  Miller, i  in  a  notable  opinion";  "  is  not  new  in 
the  constitutional  history  of  the  English  race.  It  is  not 
new  in  the  constitutional  history  of  this  country,  and  it 

1  Davidson  v.  New  Orleans,  96  U.  S.  97,  101. 
(372) 


§  318  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   373 

was  not  new  in  the  Constitution  of  the  United  States  when 
it  became  a  part  of   the  Fourteenth  Amendment  in  1866." 

Due  process  of  law  in  the  Fourteenth  Amendment  means, 
as  the  same  words  in  the  Fifth  Amendment  were  held  to 
mean,  *'by  the  law  of  the  land,"  The  latter  phrase  in 
Magna  Charta  was  said  by  Coke  i  to  mean  the  ' «  due  course 
and  process  of  the  law." 

The  law  of  the  tand  or  due  process  of  law  usually  im- 
plies and  includes  a  regular  course  of  judicial  procedure, 
summons,  hearing  and  judgment.  In  the  famous  words 
of  Mr.  Webster  .-2  "  By  the  law  of  the  land  is  most  clearly 
intended  the  general  law,  a  law  which  hears  before  it  con- 
demns, which  proceeds  upon  inquiry,  and  renders  judgment 
only  -after  trial.  The  meaning  is  that  every  citizen  shall 
hold  his  life,  liberty,  property  and  immunities  under  the 
protection  of  the  general  rules  which  govern  society. 
Everything  which  may  pass  under  the  form  of  an  enact- 
ment is  not  therefore  to  be  considered  the  law  of  the  laud." 

The  definition  of  Justice  Story  3  is  more  applicable  to 
the  "  due  process  of  law  "  in  tax  procedure :  "  Due  process 
of  law  in  each  particular  case  means  such  an  exertion  of 
the  powers  of  government  as  the  settled  maxims  of  law 
permit  and  sanction,  and  under  such  safeguards  for  the 
protection  of  individual  rights,  as  those  maxims  prescribe 
for  the  class  of  cases  to  which  the  one  being  dealt  with 
belongs." 

§  318.  Due  process  of  law  in   taxation  does   not   require 
judicial  hearing. 

Due  process  of  law  in  taxation  is  that  which  is  due  and 
appropriate  in  that  class  of  cases,  that  which  in  the  experi- 

1  2  Inst.  45,  50. 

2  From  the  argument  in  Dartmouth  College  Case,  4  Wheat.  518,  581. 

3  Story  on  Constitution,  5th  Ed.,  Sec.  1945. 


374       DUE  PROCESS  OF  LAW  IX  TAXATION  PROCEDURE.     §    318 

ence  of  our  race  in  the  enjoyment  of  self-government  has 
been  found  due  and  appropriate. 

Thus  it  has  been  uniformly  held  by  the  Federal  and  State 
courts,  for  substantiall}^  the  same  provision  is  in  all  the 
State  constitutions,  that  due  process  of  law  in  taxation  does 
not  require  regular,  nor  indeed  any,  judicial  procedure. 
This  has  been  the  ruling  both  before  and  since  the  adoption 
of  the  Fourteenth  Amendment.  Governments  must  have 
their  revenues  without  delay  at  the  times  appointed,  and 
obviously  the  collection  cannot  be  postponed  to  wait  the 
determination  of  a  common  law  trial.  They  must  from 
necessity  proceed  in  a  sunmiary  way.i 

The  leading  and  very  illustrative  case  on  this  subject  in  the 
Supreme  Court  is  Murray  v.  Hoboken  Land  Co.,i  decided 
in  1855,  holding  that  summary  process  by  way  of  distress 
warrant  from  the  United  States  Treasury  against  a  "default- 
ing collector,  constituting  a  lien  upon  his  real  estate,  was 
"  due  process  of  law  "  under  the  Fifth  Amendment  of  the 
United  States  Constitution.  The  court,  in  an  exhaustive 
opinion  by  Justice  Curtis,  holds  that  the  term  and  its  legal 
equivalent,  "  the  law  of  the  land,"  must  be  construed  in 
the  light  of  the  common  law,  and  the  summary  remedies 
authorized  thereby  in  claims  against  public  defaulters  and 
in  the  collection  of  taxes.  It  said,  page  282  :  "It  may  be 
added,  that  probably  there  are  few  governments  that  do  or 
can  permit  their  claims  for  public  taxes,  either  on  the  citi- 
zen or  on  the  officer  employed  for  their  collection  or  dis- 
bursement, to  become  subjects  of  judicial  controversy 
according  to  the  course  of  the  law  of  the  land.  Imperative 
necessity  has  forced  a  distinction  between  such  claims  and 
all  others,  which  has  sometimes  been  carried  out  by  sum- 
mary methods  of  proceeding,  and  sometimes  by  systems  of 

1  Bartlett  v.  Wilson,  59  Vt.  23. 

2  18  Howard  272. 


§   318    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       375 

fines  aud  penalties,  but  always  in  some  way  observed  and 
yielded  to." 

The  principle  thus  declared  has  been  uniforml}'  applied 
by  the  Supreme  Court  in  cases  where  due  process  of  law 
in  the  tax  procedure  of  the  States  has  been  in  question. 
In  the  first  taxation  case  under  the  Fourteenth  Amendment, 
it  was  said  that  due  process  of  law  in  taxation  does  not 
mean  by  a  judicial  hearing.  The  nation  from  which  we 
inherit  the  phrase  itself  has  never  relied  upon  the  courts  of 
justice  in  the  collection  of  taxes,  though  she  has  passed 
through  a  successful  resistance  to  unlawful  taxation, i 

In  another  taxation  case,^  it  was  said  that  taxes  have 
not,  as  a  general  rule,  in  this  country  since  its  inde- 
pendence, nor  in  England  before  that  time,  been  collected 
by  regular  judicial  proceeding.  The  necessities  of  govern- 
ment, the  nature  of  the  duty  to  be  performed  aud  the- 
customary  usages  of  the  people  have  established  a  different 
procedure,  which  in  regard  to  that  matter  is,  and  always 
has  been,  "due  process  of  law." 

In  another  early  case  under  the  Foui'teenth  Amendment, 
the  meaning  of  "due  process  of  law"  was  exhaustively 
discussed,  1.  c.  page  104,  in  a  memorable  opinion  by  Jus- 
tice Miller.^     He  laid  down  the  proposition.:  — 

"  That  whenever  by  the  laws  of  a  State,  or  by  State  au- 
thority, a  tax,  assessment,  servitude  or  other  burden  is  im- 
posed upon  property  for  the  public  use,  whether  it  be  for 
the  •whole  State  or  for  some  more  limited  portion  of  the 
community,  and  those  laws  provide  for  a  mode  of  confirm- 
ing or  contesting  the  charge  thus  imposed  in  the  ordinary 
courts  of  justice,  with  such  notice  to  the  person,  or  such 
proceeding  in  regard  to  the  property  as  is  appropriate  to 
the  nature  of  the  case,  the  judgment  in  such  proceedings 

1  Justice  Miller  in  McMillen  v.  Anderson,  95  U.  S.  37. 

2  Justice  Miller  in  Kelly  v.  Pittsburgh,  104  U.  S.  78. 

3  Davidson  v.  New  Orleans,  supra,  §  306. 


376      DUE  PROCESS  OF  LAW  IX  TAXATION  PROCEDURE.    §   319 

cannot  be  said  to  deprive  the  owner  of  his  property  with- 
out due  process  of  law,  however  obnoxious  it  may  be  to 
other  objections."  i 

§  319.  Xotice  and  hearing  not  required  in  cases  of  licen- 
ses, etc. 

Due  process  of  law  in  taxation  is  that  which*  is  due  and 
appropriate,  i.  e.  suitable  to  the  nature  of  the  case.  In 
what  are  known  as  license,  privilege  or  occupation  taxes, 
and  those  imposed  upon  specific  things,  where  the  amount 
to  be  paid  is  fixed  by  law,  and  no  valuation  is  required, 
hearing  would  be  of  no  service,  and  therefore  none  is  re- 
quired. 

Justice  Field, 2  in  the  opinion  already  referred  to,  supra, 
§  311,  says  that  the  distinction  between  taxes  upon  licenses 
and  taxes  upon  values  is  plain  and  everywhere  recognized. 

The  same  distinction  was  later  made  by  the  same  judge 
in  delivering  the  opinion  of  the  Supreme  Court  in  the  CaU- 
fornia  Drainage  District  Case,^  1.  c.  page  708 :  — 

"  It  is  suflicient  to  observe  here  that  by  '  due  process  ' 

1  Justice  Bradley  gave  an  opinion,  concurring  in  the  conclusion,  but 
saying  that  he  thought  the  opinion  of  the  court  narrowed  the  scope  of 
the  inquiry  as  to  what  is  due  process  of  law  more  than  it  should  do. 
He  thought  that  t!ie  court  is  entitled,  under  the  Fourteenth  Amendment, 
to  see  not  only  that  there  is  some  process  of  law,  but  due  process  of  law; 
and  in  judging  what  is  due  process  of  law,  attention  must  be  given  to 
the  cause  and  object  of  the  taking,  whether  under  the  taxing  power, 
the  power  of  eminent  domain,  the  power  of  assessment  for  local  improve- 
ment, or  none  of  these.  If  found  to  be  suitable  and  admissib'e  in  the 
special  case,  it  will  be  adjudged  to  be  due  process  of  law ;  but  if  found  to 
be  arbitrary,  oppressive  and  unjust,  it  may  be  declared  to  be  not  due 
process  of  law.  Such  an  examination  maybe  made,  he  concluded,  with- 
out interfering  with  that  large  discretion  which  every  legislative  power 
has  of  making  wide  modiQcations  in  the  forms  of  procedure  in  each  case, 
according  as  the  laws,  habits,  customs,  and  preferences  of  the  people  of 
the  particular  Stale  may  require. 

2  County  of  SanU  Clara  v.  So.  Pac.  R  R.  Co.,  18  Fed.  Rep.,  p.  409. 

3  Hagar  v.  Keclamation  District,  111  U.  S.  701. 


§  319  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   377 

is  meant  one  which,  following  the  forms  of  law,  is  appro- 
priate to  the  case,  and  ju&t  to  the  parties  to  be  affected. 
*  *  *  Of  the  different  kinds  of  taxes  which  the  State 
may  impose,  there  is  a  vast  number  of  which  from  their 
nature,  no  notice  can  be  given  to  the  taxpayer,  nor  would 
notice  be  of  any  possible  advantage  to  him,  such  as  poll 
taxes,  license  taxes  (not  dependent  upon  the  extent  of  his 
business)  and  generally  specific  taxes  on  things,  or  persons, 
or  occupations.  In  such  cases  the  legislature,  in  authoriz- 
ins  the  tax,  fixes  its  amount,  and  that  is  the  end  of  the 
matter. 

"  If  the  tax  be  not  paid,  the  property  of  the  delinquent 
may  be  sold,  and  he  be  thus  deprived  of  his  property. 
Yet  there  can  be  no  question,  that  the  proceeding  is  due 
process  of  law,  as  there  is  no  inquiry  into  the  weight  of 
evidence,  or  other  element  of  a  judicial  nature,  and  nothing 
could  be  changed  by  hearing  the  taxpa3^er.  No  right  of 
his  is,  therefore,  invaded.  Thus,  if  the  tax  on  animals  be 
a  fixed  sum  per  head,  or  on  articles  a  fixed  sum  per  yard, 
or  bushel,  or  gallon,  there  is  nothing  the  owner  can  do 
which  can  affect  the  amount  to  be  collected  from  him. 
So,  if  a  person  wishes  a  license  to  do  business  of  a  particu- 
lar kind,  or  at  a  particular  place,  such  as  keeping  a  hotel  or 
a  restaurant,  or  selling  liquors,  or  cigars,  or  clothes,  he 
has  only  to  pay  the  amount  required  by  the  law  and  go 
into  the  business.  There  is  no  need  in  such  cases  for  notice 
or  hearing.  So,  also,  if  taxes  are  imposed  in  the  shape  of 
licenses  for  privileges,  such  as  those  on  foreign  corpora- 
tions for  doing  business  in  the  State,  or  on  domestic  cor- 
porations for  franchises,  if  the  parties  desire  the  privilege, 
they  have  only  to  pay  the  amount  required.  In  such 
cases  there  is  no  necessity  for  notice  or  hearing.  The 
amount  of  the  tax  would  not  be  changed  by- it. 

"  But  where  a  tax  is  levied  on  property  not  specifically, 
but  according  to  its  value,  to  be  ascertained  by    assessors 


378       DUE  PROCESS  OF  LAW  IX  TAXATION  PROCEDURE.     §   320 

appointed  for  that  purpose  upon  such  evidence  as  the}'  may 
obtain,  a  different  principle  comes  in.  The  officer:?  in  esti- 
mating the  value  act  judicially;  and  in  most  of  the  States 
provision  is  made  for'the  correction  of  errors  committed  b}^ 
them,  through  boards  of  revision  or  equalization,  sitting 
at  designated  periods  provided  by  law  to  hear  complaints 
respecting  the  justice  of  the  assessments.  The  law, in  pre- 
scribing the  time  when  such  complaints  will  be  heard,  gives 
all  the  notice  required,  and  the  proceeding  by  which  the 
valuation  is  determined,  though  it  may  be  followed,  if  the 
tax  be  not  paid,  by  a  sale  of  the  delinquent's  property,  is 
due  process  of  law. 

"  In  some  States,  instead  of  a  board  of  revision  or  equal- 
ization, the  assessment  may  be  revised  by  proceedings  in 
the  courts  and  be  there  corrected  if  erroneous,  or  set 
aside  if  invalid ;  or  objections  to  the  validity  or  amount  of 
the  assessment  may  be  taken  when  the  attempt  is  made  to 
enforce  it.  In  such  cases  all  the  opportunity  is  given  to 
the  taxpayer  to  be  heard  respecting  the  assessment  which 
can  be  deemed  essential  to  render  the  proceedings  due 
process  of  law." 

§  320.   Hearing  not  required  where  valuation  is  fixed  by 
taxpayer. 

The  principle,  that  due  process  of  law  in  taxation  does 
not  require  a  hearing,  where  from  the  nature  of  the  case  it 
can  be  of  no  service,  was  applied  by  the  United  States  Cir- 
cuit Court  in  Virginia  to  the  case  of  an  assessment  of  shares 
in  national  banks.  Under  the  act  the  assessment  was  made 
upon  the  market  value  of  the  shares  as  reported  to  the  as- 
sessor by  the  bank,  and  the  act  itself  fixed  the  amount  of 
the  tax  upon  this  market  value,  so  that  the  tax  bills  were 
self -executing  and  enforceable  by  levy.  The  court  said 
that,  as  the  bank  itself  fixed  the  market  value  and  the  stat- 
ute the  amount  of  the  tax,  the  assessor's  duty  was  a  mere 


§  321  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   379 

minii^terial  one,  and  therefore  the  case  was  within  the  prin- 
ciple declared  by  the  Supreme  Court  in  Hagar  v.  Reclama- 
tion District,  svpra,  §  319.1 

§  321.  TVliere    amount   of  tax  is    dependent    on    valua- 
tion, hearinj^  is  required. 

But  the  court  said  in  the  California  Drainage  Case  that, 
where  a  tax  is  levied  on  property,  not  specifically  but  ac- 
cording to  its  value,  to  be  ascertained  by  assessors  upon 
such  evidence  as  thej'^  may  obtain,  a  different  principle  ap- 
plies, and  hearing  at  some  stage  is  required.  The  legisla- 
ture may  prescribe  the  kind  of  notice,  and  the  mode  in 
which  it  shall  be  given,  but  it  cannot  dispense  with  it  alto- 
gether. In  some  tribunal,  or  before  some  official  author- 
ized to  correct  errors,  the  owner  must  be  afforded  an 
opportunity  to  be  heard  in  respect  to  the  proceedings  under 
which  his  property  is  to  be  taken  or  burdened,  and  this 
must  be  at  some  time  before  the  tax  or  assessment 
becomes  final  or  effectual,  in  order  to  constitute  such 
procedure  due  process  of  law.- 

While  the  imposition  of  taxcsisin  its  nature  administrative 
and  not  judicial,  assessors  exercise  quasi  judicial  power  in 
arriving  at  the  value,  and  opportunity  to  be  heard  as  to 
value  should  be  given  and  is  given  under  all  just  systems  of 
taxation. 3 

"While  this  principle  that  some  opportunit}'  for  hearing 
is  necessary  in  taxing  according  to  value,  has  been  declared, 
it  is  noticeable  that  in  no  case  has  the  Supreme  Court  de- 
clared the  tax  procedure  of  a  State  wanting  in  respect  to 
the  requisite  notice  and  hearing,  though  numerous  cases  of 

1  People's  National  Bank  v.  Marye,  107  Fed.  R'  p.  571,  1.  c.  580. 

-  A  leading  case  is  Stuart  v.  Palmer,  74  N.  Y.  183.  See  also  Jackson, 
J.,  in  Scott  V.  Toledo,  supra,  §  312,  and  Field,  J.,  in  Santa  Clara  Co.  v. 
So.  Pa.c.  K.  R.,  supra,  §  311;  Gatch  v.  Des  Moines,  63  Iowa  718. 

3  Palmer  v.  MacMahon,  133  U.  S.  660,  669. 


380      DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   322 

alleged  want  of  due  process  of  law  in  assessment  or  collec- 
tion of  taxes  have  been  presented  to  the  court. 

In  several  cases  however  the  State  courts  have  declared 
tax  procedure  void  under  the  Fourteenth  Amendment  as 
wanting  in  this  particular.  Thus,  in  Virginia,i  a  city 
charter  providing  for  an  assessment  for  the  city  tax  dis- 
tinct from  the  assessment  for  the  State  tax  and  making 
no  provision  for  correction  or  review  of  the  city  assess- 
ment, and  a  statute  of  Maryland,^  requiring  distillers  and 
warehousemen  to  report  spirits  on  hand,  which  were  then 
valued  by  the  official,  but  allowing  no  hearing  or  appeal, 
were  both  held  void  under  the  Fourteenth  Amendment  as 
wanting  in  due  process  of  law.  A  statute  of  Ohio,  pro- 
viding for  the  summary  seizure  and  killing  of  unlicensed 
dogs,  was  also  held  void  as  authorizing  the  taking  of 
property  without  due  process  of  law.^ 

§  322.  Notice  and  hearing  in  inheritance  taxes. 

It  was  held  in  Iowa,*  that,  as  realty  passing  by  will  or 
inheritance  vests  immediately  in  the  heir  or  devisee  on  the 
death  of  the  owner,  a  law  providing  that  real  estate  subject 
to  an  inheritance  tax  should  be  appraised  after  the  appoint- 
ment of  an  executor  or  administrator  and  the  tax  calcu- 
lated on  the  appraised  value,  the  property  to  be  sold  in  the 
event  of  the  tax  not  being  paid  by  the  person  entitled  to 
the  estate,  was  unconstitutional  as  depriving  the  heir  or 
devisee  of  property  without  due  process  of  law,  in  that  it 
authorized  the  fixing  of  the  appraisement  for  taxation  with- 
out notice  or  opportunity  to  be  heard. 

But  the  inheritance  tax  law   of  New   York  was  held  not 


1  Heth  V.  Radford,  96  Va.  272;  Evans  v.  Fall  River  Co.,  9  So.  Dak.  130. 

2  Monticello  Distilling  Co.  v.  Baltimore,  90  Md.  417. 

3  Fagin  v.  Ohio  Humane  Society,  6  Nisi  Prius  357. 
■*  Ferry  v.  Campbell,  110  Iowa  290. 


§  323  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   381 

open  to  this    objection,  as  it  made    sufficient  provision  for 
notice  and  hearing  in  determining  the  value  of  the  estate. i 

§  323.   Opportunity  for  rehearing  or  appeal  to  courts  not 
required  in  valuation. 

In  some  States,  as  in  New  York,  the  proceedings  of  a 
board  of  assessors  or  board  of  review  in  the  valuation  of 
property  may  be  reviewed  by  certiorai^i  or  other  form  of 
procedure.  The  absence  of  such  an  opportunity  however 
does  not  constitute  want  of  due  process  of  law.  The  tax- 
payer is  deemed  to  have  his  day  in  court  in  the  matter  of 
the  valuation  of  his  propert}^  if  he  is  allowed  an  oppor- 
tunity for  hearing  at  any  stage  before  the  tax  becomes 
final,  whether  before  a  quasi  judicial  board,  or  before  any 
other  tribunal  provided  by  the  State  for  the  determination 
of  such  questions.  It  is  no  objection  that  the  procedure 
is  summary. 

Neither  does  due  process  of  law  require  any  rehearing 
or  retrial.  The  Supreme  Court  said  in  the  Indiana  railroad 
cases: 2  "A  hearing  before  judgment,  with  full  opportun- 
ity to  present  all  the  evidence  and  the  arguments  which  the 
party  deems  important,  is  all  that  can  be  adjudged  vital. 
Eehearings,  new  trials,  are  not  essential  in  due  process  of 
law,  either  in  judicial  or  administrative  proceedings.  One 
hearing,  if  ample,  before  judgment,  satisfies  the  demand 
of  the  Constitution  in  this  respect."  It  was  contended  in 
this  case  that  the  valuation  fixed  by  the  board  was  not  an- 
nounced until  shortly  before  adjournment,  and  that  no 
notice  was  given  of  such  valuation  in  time  to  take  any 
steps  for  the  correction  of  errors.  But  the  court  said  that 
was  immaterial,  as  one  hearing  before  judgment  was  all 
that  could  be  asked. 

'  In  re  Fuller's  Estate,  71  N.  Y.  Supp.  40;  see  also  Union  Trust  Co. 
V.  Wayne  Probate  Judge,  125  Mich.  487. 

-  154  U.  S.  426;  McLeod  v.  Receveur,  71  Fed.  Rep.  455. 


382      DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §  325 

§  324.  Ruling  of    State  court   that    hearing  is  required 
is  conclusive. 

While  a  party  is  entitled  to  a  hearing  as  of  right,  that 
is,  it  must  be  given  him  as  a  matter  of  law,  and  not  as  a 
matter  of  favor,  the  construction  by  the  State  court  of  the 
State  statute  that  such  hearing  is  allowed  by  the  statute  is 
conclusive  upon  the  Supreme  Court. i  In  this,  as  in  other 
cases,  it  is  the  statute  as  construed  by  the  State'  court 
which  must  deny  due  process  of  law.  Even  where  the 
statute  itself  makes  no  provision  for  a  hearing,  and  the 
State  courts  hold  that  the  taxpayer,  is  entitled  to  it  by 
virtue  of  the  Constitution  construed  with  the  statute,  the 
statute  and  the  Constitution  will  be  construed  together, 
and  there  will  be  no  denial  of  due  process  of  law. 2 

§  325.  Personal  notice  of  fixed  public  sessions  of  revision 
hoards  not  reqviired. 

The  requisite  notice  need  not  however  be  personal.  It 
is  sufficient  that  the  board  of  review  or  other  revising  au- 
thority  holds  its  sessions  at  stated  times,  when  parties  so 
desiring  can  be  heard  in  relation  to  their  assessments. 
Thus  the  court  said  in  the  Kentucky  Railroad  Cases,^  that 
the  meetings  of  the  board  of  equalization  were  public  and 
not  secret.  The  time  and  place  of  holding  them  were  fixed 
by  law,  and  therefore  there  was  in  law  both  notice  and 
hearing. 

In  another  case,^  involving  assessments  of  national  bank 
shareholders,  the  court  said,  1.  c.  page  466 :   "  It  is  true  the 

1  See  Indiana  Railroad  Cases,  supra,  §  243. 

2  Kentucky  Railroad  Tax  Cases,  115  U.  S.  1.  c.  334. 

3  Kentucky  Railroad  Tax  Cases,  115  U.  S.  321;  see  also  State  Railroad 
Tax  Cases,  92  U.  S.  575,  1.  c.  609. 

4  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461 ;  Palmer  v.  McMahon, 
133  U.  S.  660;  Hagar  v.  Reclamation  District,  111  U.  S.  701;  American 
Transit  Co.  v.  Thomas  (Colo.),  63  Pac.  Rep.  410;  Straight  v.  Durham,  10 
Ok.  361. 


§   325    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       383 

statute  contemplates  no  personal  notice  to  the  shareholders, 
but  that  has  never  been  considered  an  essential  to  due  pro- 
cess in  respect  to  taxation.  The  statute  defines  the  time 
when  the  bank  shall  make  its  report  to  the  auditor  general, 
and  it  specifically  directs  him  to  hear  any  stockholder  who 
may  desire  to  be  heard.  The  statute,  therefore,  fixes  the 
time  and  place,  for  official  proceedings  are  always,  in  the 
absence  of  express  provision  to  the  contrary,  to  be  had  at 
the  office  of  the  officer  charged  with  the  duties,  and  a  notice 
to  all  property  holders  of  the  time  and  pUice  of  which  the 
assessment  is  to  be  made,  is  all  that  due  process  requires  in 
respect  to  the  matter  of  notice  in  tax  proceedings."  It  was 
further  said  that ' '  the  law  in  prescribing  the  time  when  such 
complaints  will  be  heard,  gives  all  the  notice  required  ;  and 
the  proceeding  by  which  the  valuation  is  determined, 
though  it  may  be  followed,  if  the  tax  be  not  paid,  by  a  sale 
of  the  delinquent's  property,  is  due  process  of  law." 

This  principle  was  applied  in  a  recent  case,  where  the 
Supreme  Court  reversed  the  Circuit  Court  of  Appeals,  Sixth 
Circuit,!  and  held  that  notice  of  the  time  and  place  of  the 
first  meeting  of  the  State  board  for  the  equalization  of 
assessments  of  bank  shares  under  the  Ohio  law  was  sufficient 
notice  to  any  banks  which  might  be  affected  by  its  action, 
although  such  action  should  be  taken  at  a  meeting  of  the 
board  after  it  had  adjourned  without  fixing  a  date  for  a 
subsequent  meeting.  It  seems  that  in  this  case  the  bank 
rested  on  the  evidence  it  had  returned  to  the  Auditor.  The 
board  met  and  adjourned  on  Sept.  20,  without  fixing  a  date 
of  meeting,  and  at  a  subsequent  called  meeting,  held  on 
Dec.  4,  without  notice  to  the  bank,  raised  the  assessment 
of  its  shares.  The  court  said :  "  The  board  was  a  public  tri- 
bunal, open  to  be  invoked,  and  charged  with  duties,  and 

--'  1  Lander  v.  Mercantile  National  Bank  of  Cleveland,  22  Sup.  Ct.  Rep. 
908,  reversing  Mercantile  Nat'l  Bank  v.  Hubbard,  45  C.  C.  A.  66. 


384      DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.    §   326 

necessarily  subject  to  adjournments.  What  it  had  done  the 
bank  could  easily  have  ascertained  and  as  easily  what 
it  contemplated  doing.  An  inquiry  would  have  ascertained 
both.  By  the  exertion  of  a  very  trifling  trouble  the  bank 
would  have  been  informed  of  every  meeting  of  the  board." 
The  effect  of  this  ruling  is  to  charge  taxpayers  with 
notice,  not  only  of  the  regular  and  stated  meetings  of  revis- 
ing boards,  but  also  of  called  meetings  held  at  any  time 
before  their  final  adjournment.  He  must  take  notice  that 
the  board  may  increase  his  assessment  at  any  such  meet- 
ing, and  is  not  bound  to  give  him  any  notice  that  it  con- 
templates any  such  action,  that  is,  such  increase  does  not 
violate  the  due  process  of  law  guaranteed  by  the  Federal 
Constitution.  As  State  revising  boards  usually  meet  at  the 
State  capital,  tliis  ruling  in  practical  operation  may  deprive 
parties  of  the  opportunity  of  showing  that  a  proposed  in- 
crease in  assessments  is  unwarranted,  as  it  seems  that  such 
increase  may  be  made  at  a  called  meeting,  when  they  have 
no  opportunity  of  knowing  that  the  meeting  is  to  be  held 
or  that  any  increase  in  their  assessments  is  contemplated. 

§  326.  Provision  for  notice  may  be  implied. 

It  is  not  necessary  that  a  statute  or  ordinance  should 
make  express  provision  for  notice  to  taxpayers,  for  what  is 
implied  in  a  statute  is  as  much  a  part  of  it  as  that  which  is 
expressed.  Accordingly  where  a  statute  or  an  ordinance 
provides  for  stated  meetings  of  a  board,  designates  the  place 
at  v.'hich  the  meetings  are  to  be  held  and  directs  that  all 
persons  interested  in  the  matter  may  be  heard  before  it,  it 
is  implied  thereby  that  suitable  notice  shall  be  given  to  the 
parties  interested.! 

The  court,  after  saying  that  seemingly  the  final  construc- 

1  Paulsen  v.  Portland,  149  U.  S.  30. 


§   327    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       385 

tion  placed  by  the  State  Supreme  Court  was  to  the  effect 
that  the  charter  required  notice,  added,  1.  c.  page  38  :  — 

"But  were  it  otherwise,  while  not  questioning  that  notice 
to  the  taxpayer  in  some  form  must  be  given  before  an  as- 
sessment for  the  construction  of  a  sewer  can  be  sustained, 
as  in  any  other  demand  upon  the  individual  for  a  portion  of 
his  property,  we  do  not  think  it  essential  to  the  validity  of 
a  section  in  the  charter  of  a  city  granting  power  to  con- 
struct sewers  that  there  should  in  terms  be  expressed  either 
the  necessity  for  or  the  time  or  manner  of  notice.  The 
city  is  a  miniature  State,  the  council  is  its  legislature,  and 
the  charter  is  its  constitution ;  and  it  is  enough  if,  in  that, 
the  power  is  granted  in  general  terms,  for  when  granted,  it 
must  necessarily  be  exercised  subject  to  all  limitations 
imposed  by  constitutional  provisions,  and  the  power  to  pre- 
scribe the  mode  of  its  exercise  is,  except  as  restricted,  sub- 
ject lo  the  legislative  discretion  of  the  council." 

§  327.  Distinction  between  assessments  for  general  and 
special  taxation. 

There  is  a  distinction  to  be  observed  betw.een  assessments 
for  the  regularly  recurring  general  taxation  and  those  spe- 
cially made  for  local  improvements.  The  former  are  re- 
viewed by  a  board  of  equalization  which  sits  regularly  at 
stated  intervals,  and  of  these  sessions  the  taxpayer  is  bound 
to  take  notice,  so  that  no  special  notice  is  required. 
Special  assessments,  on  the  other  hand,  are  not  made  at 
regular  intervals,  but  whenever  the  public  necessity  or  con- 
venience requires.  The  taxpayer  therefore  can  not  be 
charged  with  constructive  notice  of  such  proceedings  and 
he  must  have  some  specific  notice  of  the  proposed  charge 
against  his  property.  This  notice  need  not  be  personal, 
but  may  be  sufficiently  made  by  publication.! 

1  Lent  V.  Tillson,  140  U.  S.  316;  see  infra,  Chapter  XIII,  '' Assessments 
for  Local  Improvements." 


386       DUE  PKOCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   329 

§  328.  l^fotice  by  publication. 

In  service  by  publication,  which  is  sufficient  in  case 
of  special  assessments  requiring  notice  in  some  form,  the 
notice  must  be  sufficiently  full  and  clear  to  disclose  to  the 
taxpayer,  supposing  him  to  have  ordinary  intelligence,  in 
a  general  way  what  is  proposed.  The  time  and  place  ap- 
pointed must  be  such  that  with  reasonable  effort  he  will  be 
able  to  attend  and  present  his  objections. 

Thus,  in  a  recent  case,i  it  was  held  that  ten  days  notice 
-given  by  publication  for  three  successive  days  was  suffi- 
cient. The  court  said,  at  page  318,  that  perhaps  the 
authority  of  the  legislature  to  prescribe  the  length  of  time 
of  notice  is  not  absolutely  beyond  review,  but  it  is  certain 
that  only  in  a  clear  case  will  a  notice  authorized  by  the 
legislature  be  set  aside  as  being  ineffectual  on  account  of  the 
shortness  of  the  time.  How  many  days,  it  was  asked,  can 
the  court  fix  as  a  minimum  ?  It  seems  that  in  this  case  there 
had  been  a  prior  assessment  which  had  been  set  aside,  and 
the  court  said  that,  as  the  facts  were  known,  ten  days 
time  did  not  seem  unreasonably  short  for  presenting  objec- 
tions to  a  reassessment.  Notice  had  been  published  in  the 
official  paper,  which  the  court  said  was  proper,  as  the 
party  interested  would  naturally  look  there  for  informa- 
tion. 

In  Lent  v.  Tillson,  supra,  the  point  was  made  that  the 
notices  were  not  published  a  sufficient  number  of  days, 
because  on  some  of  the  days  they  appeared  in  the  supple- 
ment of  some  of  the  newspapers,  rather  than  in  the  body 
where  reading  matter  is  usually  found.  But  this  objec- 
tion the  court  said  did  not  deserve  serious  consideration. 

§  329.  Due  process  satisfied  by   opportunity  for  hearing- 
at  any  stage  of  the  proceeding. 

It  is  immaterial  when  in  the  proceedings,  whether  by  way 
1  Bellingham  Bay,  etc.,  Co.  v.  New  Whatcom,  172  U.  S.  314. 


§  330  DUE  PROCESS  OF  LAAV  IN  TAXATION  PROCEDURE.   387 

of  reviewing  the  assessment,  or  in  the  collection  of  the  taxes, 
hearing  is  allowed,  provided  it  is  allowed  at  some  stage. 
Thus  if  the  tax  can  only  be  collected  by  suit,  and  any 
defense  can  be  pleaded  going  to  the  illegality  or  error 
in  the  assessment,  this  will  be  sufficient.!  But  it  will 
not  be  sufficient,  if  the  defenses  are  limited  by  statute,  so 
that  the  question  of  error  in  the  assessment  cannot  be  con- 
sidered. It  was  said  by  the  Supreme  Court  however  that 
as  a  matter  of  general  jurisprudence,  in  the  absence  of  any 
contrary  provision  in  the  statute,  any  defense  would  be  ad- 
missible in  the  suit  for  collection  which  would  establish 
the  illegality  of  the  assessment. 2 

It  would  seem  however  that  an  assessment  that  is  un- 
equal or  excessive  might  be  erroneous,  when  it  would  not 
be  illegal,  and  that  due  process  of  law  would  require  that 
the  taxpayer  should  have  his  opportunity  for  hearing  on 
the  question  of  error  in,  that  is,  as  to  the  amount  of  his 
assessment. 

It  was  stated  in  a  case  from  Louisiana  that,  where  the 
statute  gives  the  person  against  whom  taxes  are  assessed  a 
right  to  enjoin  their  collection  and  have  their  validity  judi- 
cially determined,  this  is  due  process  of  law,  although  he  is 
required,  as  are  plaintiffs  in  other  injunction  cases,  to  give 
security  in  advance. ^  This  however  was  a  case  of  a  license 
tax  fixed  by  law  upon  the  business  of  a  liquor  seller,  and 
there  seems  to  have  been  no  occasion  for  any  hearino-  for 
valuation. 

§  330.  Collection  of  taxes  tlirougii  summary  proceedings. 

The  collection  of  taxes  belongs  to  the  executive  branch 
of  the  government,  and  the  summary  methods  for  enforc- 

1  Vanceburg  &  S.  L.  Turnpike  Co.  v.  Maysville,  63  S.  W.  Rep.  749. 

2  Kentucky  Railroad  Tax  Case,  supra,  §  325. 

8  McMillen  v.  Anderson,  95  U.  S.  37;  Oskarap  v.  Lewis,  103  Fed.  906- 


388      DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   331 

ing  such  collections  sanctioned  by  long  experience  consti- 
tute due  process  of  law.  The  reasonable  exercise  by  the 
leo'islature  of  a  right  of  classification,  to  provide  a  summary 
process  for  the  sale  of  property  for  delinquent  taxes 
amounting  to  less  than  a  stated  amount  does  not  deprive 
the  taxpayer  of  due  process  of  law.i  Distress  warrants 
for  the  collection  of  personal  property  taxes  without  prior 
notice  or  an  opportunity  to  be  heard  are  consistent  with 
due  process  of  law,  as  they  were  always  known  to  the  com- 
mon law. 2 

§  331.   Collection  of  taxes  tlirough  distraint  and  seizure. 

Distraint  and  seizure  of  person  for  the  collection  of  de- 
linquent taxes  are  also  consistent  with  due  process  of  law. 
This  was  illustrated  in  a  decision  sustaining  the  New  York 
statute,  according  to  which  the  party  failing  to  pay  taxes 
on  personalty  was  subject  not  only  to  distraint  and  sale  of  his 
personal  propert}^  but  also  to  fine  for  misconduct.  A  na- 
tional bank  stockholder  was  prosecuted  and  convicted  under 
this  law,  and  ordered  to  stand  committed  until  he  paid  the 
amount  of  the  tax  with  interest  and  costs,  unless  the  court 
should  see  fit  sooner  to  discharge  him.  The  Supreme  Court 
affirmed  the  judgment  ^  and  said,  page  669:  — 

"  Collection  by  distress  and  seizure  of  person  is  of  very 
ancient  date,  Murray's "  Lessee  v.  Hoboken  Laud  Co.,  18 
How.  272 ;  and  counsel  for  defendant  in  error  cites  many 
English  statutes,  commencing  with  the  twelfth  year  of 
Henry  VII,  c.  13,  which  in  their  essential  features  resem- 
ble the  New  York  law  upon  the  subject,  one  in  6  Henry 
VIII,  c.  26,  being  strikingly  like  it.  2  Statutes  of  the 
Kealm  644;  3  lb.  156,  230,  516,  812;  4  lb.  176,334,385, 


1  Sawyer  v.  Dooley,  21  Nev.  390. 

2  Nelson  Lumber  Co.  v.  McKinnon,  61  Minn.  219. 

3  Palmer  v.  McMahon,  133  U.  S.  660,  affirming  102  N.  Y.  176. 


§   332    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.        389 

744,  991,  1108,  1247;  5  lb.  9,  700;  7  lb.  567.  Under  the 
act  of  1843  commitment  is  not  resorted  to  until  other  means 
of  collection  have  failed  and  then  only  upon  a  showing  of 
property  possessed,  not  accessible  by  levy,  but  enabling 
the  owner  to  pay  if  he  chooses,  this  constituting  such  mis- 
conduct as  justifies  the  order.  That  law  had  been  in  exist- 
ence for  more  than  forty  years  at  the  time  of  this  proceeding. 
We  do  not  regard  the  collection  in  this  way,  founded  on 
necessity  and  so  long  recognized  in  the  State  of  New  York 
as  to  be  justifiabl}^  resorted  to  under  the  circumstances  de- 
tailed in  the  act,  and  operating  alike  on  all  persons  and 
property  similarly  situated,  as  within  the  inhibitions  of 
the  Fourteenth  Amendment." 

§  332.    Legislative    discretion  in   imposing-  penalties   on 
delinquents. 

The  infliction  of  penalties  on  delinquents  is  a  usual  and 
legitimate  mode  of  compelling  the  prompt  paj^ment  of  taxes 
and  is  consistent  with  due  process  of  law.  The  same  prin- 
ciple of  classification  allowed  to  legislative  discretion  in  the 
imposition  of  taxes,  see  infra,  Chapter  XV,  is  allowed  in 
the  enactment  of  penalties,  and  the  amount  of  the  pen- 
alties is  a  matter  for  the  legislature  to  determine.  This 
principle  was  applied  by  the  Supreme  Court  i  in  sustaining 
a  statute  of  Indiana  imposing  a  penalty  of  fifty  per  cent  of 
the  amount  of  taxes  unpaid  upon  telegraph,  telephone,  ex- 
press and  fast  freight  associations,  while  the  general  law  of 

1  Western  Union  Telegraph  Co.  V.  Indiana,  165  U.  S.  304.  But  in  a 
recent  case,  United  States  Trust  Co.  v.  New  Mexico,  183  U.  S.  535,  the 
court  refused  to  enforce  a  penalty  imposed  by  the  laws  of  the  Terri- 
tory of  New  Mexico,  for  the  non-payment  of  taxes  levied  upon  railroad 
property  in  a  foreclosure  proceeding,  on  the  ground  that  it  was  in- 
equitable to  charge  interest  or  penalty  until  there  was  an  identification 
of  the  property  subject  to  taxation  and  a  determination  of  the  amount 
due.  See  also  Litchfield  v.  County  of  Webster,  101  U.  S.  773,  where 
statutory  interest  in  nature  of  penalty  was  denied  on  equitable  grounds. 


390   DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.  §  333 

the  State  only  imposed  ten  per  cent  for  the  first  six  months 
of  delinquency  and  an  additional  six  per  cent  for  the  second 
six  months.  The  court  said  that  the  legislature  might  well 
have  concluded  that  the  ordinary  remedies  for  the  collection 
of  taxes,  distraint  and  sale,  in  the  case  of  such  companies 
would  be  open  to  the  objection  of  interfering  with  the  exer- 
-cise  of  their  functions,  and  this  furnished  a  sufficient  ground 
for  the  adoption  of  another  mode  of  enforcing  collections. 
Moreover  the  company,  if  it  wished  to  contest  the  legality 
of  taxes,  could  have  paid  them  under  protest  and  brought 
suit  to  recover  back  the  monej^  so  paid.i 

§  333.  Plenary  power  of  State   in   assessments   and   re- 
assessments. 

In  the  assessment  of  property  for  taxation,  the  State  may 
make  the  ownership  subject  to  taxation  relate  to  any  day  or 
days  or  period  of  the  year  which  it  may  think  proper,  and  the 
selection  of  a  particular  day,  on  which  returns  are  to  be 
made  by  the  taxpayers  of  their  property  for  the  purposes 
of  assessment,  does  not  necessarily  preclude  the  making  of 
assessments  as  of  other  periods  of  the  year.  This  was  illus- 
trated in  a  case  from  Ohio  already  cited,^  where  the  statute 
provided  for  the  assessment  for  taxation  of  the  monthly 
average  amount  or  value  of  the  property  or  goods  in  which 
taxpayers  were  dealing.  The  court  said,  at  page  600 : 
"  Of  the  right  of  the  State  of  Ohio  to  make  this  provision 
we  have  no  doubt.  We  know  of  no  principle  which  forbids 
that  State  from  taking  the  whole  period  of  a  business  year 
already  passed  as  the  best  means  of  ascertaining  how  much 
the  taxpayer  shall  be  required  to  pay  on  property  which  is 
admitted  to  be  taxable,  and  how  much  he  shall  deduct  for 
the  non-taxable  securities  of  the  State  and  of  the  United 


1  Justices  Harlan  and  White  dissenting. 

2  Shotwell  V.  Moore,  supra,  §  37. 


§  333    JDUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       391 

States."  If  property  real  or  personal  has  been  omitted 
from  the  assessment  in  any  year,  or  if  that  actually 
assessed  has  been  grossly  undervalued  in  the  assessment, 
the  State  has  the  right  to  have  it  assessed  or  re- assessed, 
as  the  case  may  be,  and  such  action  does  not  impair  the 
constitutional  rights  of  the  property  owner. i 

In  another  case  from  Ohio  the  Supreme  Court  enforced 
a  statute  which  empowered  county  auditors  to  issue  com- 
pulsory proceSiS  to  bring  before  them  persons  who,  they 
had  reason  to  believe,  were  making  false  returns  of  prop- 
erty for  the  purposes  of  taxation,  and  to  examine  them 
under  oath,  and  which  authorized  them  also  to  extend  their 
inquiries  into  returns  of  property  for  a  period  of  four 
years  next  before  that  in  which  the  inquiry  was  made. 2 
The  court  said  that  a  taxpayer  has  no  vested  right  in  the 
fruits  of  false  returns,  and  that  the  act  simply  gave  a  new 
remedy  to  the  State  for  enforcing  a  right  which  it  already 
possessed. 

Thus  a  statute  of  Minnesota  was  sustained  by  the  Su- 

1  Douglas  County  v.  Coramonwealth,  97  Va.  397. 

2  Sturges  V.  Carter,  114  U.  S.  511.  This  case  was  brought  upon 
writ  of  error  to  the  United  States  Circuit  Court  and  no  Federal  ques- 
tion seems  to  have  been  raised:  but  the  act  was  claimed  to  be  in  viola- 
tion of  the  Ohio  constitution  which  prohibited  the  passage  of 
retroactive  laws.  In  Co-operative  Building  &  Loan  Association  v. 
State,  156  Ind.  463,  the  Supreme  Court  of  Indiana  sustained  a  statute  giv- 
ing tax  ofScials  the  right  to  examine  books  and  papers  of  taxpayers  for 
the  purpose  of  properly  listing  and  assessing  property  for  taxation,  and 
issued  a  writ  of  mandamus  against  a  Building  and  Loan  Association  to 
examine  its  books  for  evidence  of  property  omitted  from  the  tax  list. 
The  court  said  that  the  Fourth  Amendment  to  the  Federal  Constitution 
against  unreasonable  .  searches  and  seizures  operates  upon  the  national 
government  alone,  and  that  the  similar  provision  in  the  State  statute 
was  not  violated,  as  there  was  nothing  unreasonable  in  the  requirement. 
"If  the  omission  was  accidental,  the  owner  ought  not  to  complain, 
and  if  intentional,  he  ought  not  to  be  heard  except  as  to  the  proof  of 
the  supposed  discoveries." 


392       DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   333 

preme  Courts  which  authorized  the  governor,  when  it  should 
be  made  to  appear  that  there  had  been  any  gross  underval- 
uation of  taxable  property  by  the  assessors  for  any  county 
in  the  State,  to  appoint  a  board  to  revalue  and  reassess  it. 
Tl^is  board  should,  after  examination,  prepare  a  list  of  all 
such  property  for  the  year  or  years  for  which  it  was  under- 
valued, the  amount  of  the  assessment  and  the  actual  and 
true  value  at  which  it  should  have  been  assessed.  The 
statute  further  provided  for  the  recovery  of  the  tax  upon 
this  new  assessment.  It  was  claimed  that  this  law  gave 
the  executive  the  power  of  setting  aside  the  assessment 
without  notice  or  opportunity  to  be  heard.  But  this  con- 
tention was  not  well  founded,  for  the  governor  did  not  act 
judicially,  but  only  started  the  inquiry,  and  the  land-owner 
was  allowed  a  defense  before  his  land  could  be  sold  for 
taxes,  because  the  tax  was  collected  by  suit.  The  only 
grounds  of  defense  open  to  him  in  the  suit  were  that  the 
special  facts  authorizing  the  reassessment  for  past  years 
did  not  exist  and  that  the  property  had  been  reassessed 
partially,  unfairly  or  unequally.  The  court  held  that  this 
constituted  due  process  of  law,  saying,  at  page  558  :  — 

"If  an  officer  omits  to  assess  property  or  grossly  under- 
values it  he  violates  his  duty,  and  the  property  and  its 
owners  escape  their  just  share  of  the  public  burdens.  In 
Stanley  v.  Supervisors  of  Albany,  121  U.  S.  535,  we  held 
that  against  an  excessive  valuation  of  property  its  owner 
had  a  remedy  in  equity  to  prevent  the  collection  of  an 
illegal  excess.  It  would  be  very  strange  if  the  State, 
against  a  gross  undervaluation  of  property,  could  not  in 
the  exercise  of  its  sovereignty  give  itself  a  remedy  for  the 
illegal  deficiency." 

1  Weyerhauser  v.  Minnesota,  176  U.  S.  550,  affirming  72  Minn.  519  and 
68  Minn.  353. 


§   333    DUE  PROCESS  OF  LAW  IX  TAXATION  PROCEDURE.       393 

In  another  case  under  the  Minnesota  statute,  it  was  heldi 
to  be  immateriai  that  the  legislature  did  not  provide  at  the 
same  time  for  the  assessment  of  back  taxes  on  personal 
property.  The  legislature  might  well  determine,  in  view 
of  the  stationary  character  of  real  estate  and  the  probabil- 
ity of  change  in  the  title  of  personal  property,  that  it  was 
impracticable  to  proceed  for  back  taxes  in  the  case  of  the 
latter. 

A  statute  of  Indiana  for  the  collection  of  back  taxes  on 
personal  propertj'^  was  also  sustained  by  the  court. ^  The 
statute  authorized  the  county  auditor,  when  he  had  reason 
to  believe  that  any  real  or  personal  property  had  been 
omitted  from  the  assessment  book,  to  correct  the  tax  du- 
plicate and  add  such  property  thereto.  It  was  made  the 
duty  of  every  administrator  or  executor  to  pay  the  taxes 
due  upon  the  property  of  the  estate  in  his  hands,  and  if  he 
neglected  to  do  so,  having  sufficient  money  on  hand,  it 
then  became  the  duty  of  the  county  treasurer  to  present 
this  matter  to  the  court.  An  executor,  who  resided  in  New 
Hampshire  and  was  visiting  Indianapolis  in  the  settlement 
of  the  estate,  was  served  with  notice  by  the  auditor  of  an 
assessment  for  back  taxes,  amounting  to  over  $60,000. 
The  treasurer  thereupon  filed  suit  against  him.  The  exec- 
utor claimed  that  the  statute  was  in  violation  of  the  Four- 
teenth Amendment,  as  he  was  a  non-resident,  that  he  was 
deprived  of  the  property  without  due  process  of  law,  and 
that  the  court  had  no  jurisdiction.  The  Supreme  Court  of 
Indiana  held  that  he  was  an  official  resident  at  the  time 
suit  was  commenced  and  therefore  was  within  the  statute.-" 
The  Supreme  Court  said  that  the  method  followed  by  the 
auditor    in   assessing    the    additional    taxes    was    perhaps 


1  Winona  &  St.  Peter  Land  Co.  v.  Minnesota,  169  U.  S.  526.     See  also 
State  V.  Weyerliauscr,  G8  Minn.  353. 

2  Gallup  V.  Schmidt,  183  U.  S.  300. 

3  154  lad.  196. 


394     DUE  PROCESS  or  law  in  taxation  procedure.   §  334 

open  to  criticism,  but  that,  as  it  was  approved  by  the  State 
courts,  there  was  no  question  over  which  that  court  had 
jurisdiction.  It  is  the  settled  law,  the  court  declared,  that, 
when  it  is  asked  to  review  taxation  proceedings  of  the 
State  courts,  it  must  hold  due  process  of  law  to  have  been 
afforded  litigants  if  they  have  had  an  opportunity  to  ques- 
tion the  validity  or  amount  of  the  assessment  or  charge  be- 
fore the  amount  was  determined,  or  at  any  subsequent  pro- 
ceedings to  enforce  its  collection,  or  at  any  time  before 
final  judgment  is  rendered.  As  the  executor  had  his  day 
in  court  in  the  suit  to  collect  the  tax,  there  had  been  due 
process,  of  law, 

§  334.  Legislative   legalization   of   defective    assessment 
held  void. 

While  the  State  may  re-assess  property  which  has  been 
defectively  assessed,  it  can  only  do  so  through  valuation, 
subject  to  the  right  of  the  taxpayer  to  a  hearing,  where 
hearing  is  required.  A  re-assessment  cannot  be  made  di- 
rectly by  legislative  enactment.  Thus  in  the  State  of  New 
York,  where  the  statute  for  the  taxation  of  national  bank 
shares  had  been  declared  illegal,  the  legislature  passed  an 
act  attempting  to  validate  the  illegal  assessments.  It  was 
held  by  the  United  States  Circuit  Court  that  the  act  was 
void.i  The  court  said  that  the  legislature  could  not  "sanc- 
tion retroactively  such  proceedings  in  the  assessment  of  a 
tax  as  it  could  not  have  sanctioned  in  advance."  The  act 
permitted  a  review  by  certiorari  upon  the  single  ground  that 
the  assessment  was  at  a  higher  proportionate  value  than 
other  property  on  the  same  assessment  roll  assessed  by  the 
same  officers.  But  the  court  said  that  the  act  was  defect- 
ive because  it  did  not  allow  hearing  upon  the  other  grounds 
which  are  open  to  taxpayers  generally,  and  that  it  was,  in 

1  Albany  City  National  Bank  v.  Maher,  9  Fed.  Rep.  884. 


§   335    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       395 

effect,  a  legislative  assessment  of  a  tax  upon  a  body  of 
individuals  selected  out  of  a  general  class,  without  ap- 
portionment or  equality  between  them  and  the  general 
class,  or  between  themselves,  and  without  giving  them  any 
opportunity  to  be  heard. 

A  subsequent  curative  act  however  was  held  valid,  as  it 
was  made  subject  to  the  right  of  the  parties  interested  to  a 
hearing.  It  was  held  to  be  competent  for  the  legislature 
to  validate  retroactively  any  tax  proceedings  which  it  could 
have  authorized  in  advance.  It  is  not  necessary  in  such 
case  that  the  hearing  be  secured  before  the  assessment  or 
collection  of  the  tax.  It  is  sufficient  if  reasonable  pro- 
vision is  made  for  a  hearing  afterwards,  so  that  there  may 
be  a  correction  of  errors  or  a  restitution  of  the  taxes  or  the 
part  of  the  tax  unjustly  imposed. i 

An  act  of  South  Dakota,  purporting  to  legalize  retroac- 
tively an  assessment  in  the  taxation  of  all  property  within 
a  certain  county  during  certain  3^ears,  was  held  unconstitu- 
tional, in  so  far  as  the  legislature  attempted  to  dispense 
with  statutory  notice  to  the  taxpayer  by  a  meeting  of  the 
board  of  equalization  at  the  designated  time  and  place 
and  in  the  manner  required  by  statute,  since  an  opportunity 
to  be  heard  at  some  stage  of  the  proceedings  is  a  condition 
precedent  to  the  authorized  seizure  and  sale  of  property 
for  delinquent  taxes. 2 

§  335.  Forfeiture  of  lauds  for  taxes. 

The  forfeiture  to  the  State  and  subsequent  sale  of  lands 
for  non-pajanent  of  taxes,  with  liberty  to  the  owner  upon 
due  notice  of  the  proceeding  to  intervene  by  petition  and 
secure  a  redemption  of  his  lands  from  the  forfeiture  by 
paying  the  taxes  and  charges,  is  not  inconsistent  with  due 

1  Exchange  Bank  Tax  Cases,  21  Fed,  Rep.  99. 

2  Evans  v.  Fall  River  County,  9  S.  Dak.  130. 


396       DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   335 

process  of  law.  The  system  established  by  West  Virginia, 
which  had  been  in  force  for  many  years  before  the  organi- 
zation of  that  State  in  Virginia,  provided  that  lands  liable 
to  taxation  should  be  forfeited  to  the  State,  if  the  owner 
should  not  have  them  placed  in  the  proper  land  books  for 
taxation  and  have  himself  charged  with  the  taxes  thereon 
for  five  consecutive  years.  The  land,  on  petition  filed  by. 
the  representative  of  the  State  with  the  Circuit  Court,  was- 
to  be  sold  for  the  benefit  of  the  school  fund.  The  court 
held  that  this  was  due  process  of  law.i  It  was  urged  that 
the  landowner  would  be  without  remedy  if  the  State  should 
fail  to  institute  proceedings  for  sale.  But  the  court  said 
that  it  could  not  be  presumed  that  the  commissioner  would 
neglect  to  discharge  a  duty  expressly  imposed  upon  him ,  or 
that  the  courts  were  powerless  to  compel  him  to  act  when 
his  action  was  necessary  for  the  protection  of  the  rights  of 
the  landowner.  The  argument  of  the  plaintiff,  the  court 
said,  proceeded  upon  the  erroneous  theory  that  all  the 
principles  involved  in  due  process  of  law,  as  applied  to 
proceedings  strictly  judicial  in  their  nature,  apply  equally 
to  proceedings  for  the  collection  of  public  revenue  b}^  taxa- 
tion. On  the  contrary,  it  is  well  settled  that  very  sum- 
mary remedies  may  be  used  in  the  collection  of  taxes  that 
could  not  be  applied  in  cases  of  a  judicial  character.  The 
judiciary  should  be  very  reluctant  to  interfere  with  the  taxing 
system  of  a  State,  and  should  never  do  so  unless  that 
which  the  State  attempts  is  a  palpable  violation  of  the  con- 
stitutional rights  of  the  property  owners. 

But  a  statute  of  Maine,  requiring  owners  of  lands  sold 
for  the  non-payment  of  taxes  to  deposit  with  the  clerk 
of  the  court  the  amount  of  all  the  taxes,  interest  and  costs 
accrued  up  to  that  time,  before  they  could  be  admitted  to 

1  King  u.  Mullins,  171  U.  S.  404;  see  also  State  v.  Sponaugle,  45  W. 
Va.  415,  and  43  L.  R.  A.  727;  State  v.  Cheney,  45  W.  Va.  478. 


^  336  DUE  PROCESS  OF  LAAV  IX  TAXATION  PROCEDURE.    397 

test  the  validity  of  the  tax  or  sale,  was  held  void  hy  the 
Supreme  Court  of  Maine,  as  depriving  them  of  their  prop- 
erty without  due  process  of  law.i  It  was  held  in  New  York 
that  where  the  defect  in  the  original  imposition  of  the  tax 
is  of  so  jurisdictional  a  character  as  to  be  beyond  the 
reach  of  a  curative  legislative  act,  as  where  a  tax  levy  was 
void  because  the  sum  was  assessed  in  the  name  of  one  who 
was  not  the  owner  or  occupant  of  the  land,  the  original 
owner  is  not  precluded  from  asserting  his  title  by  a  statute 
making  the  deeds  of  a  comptroller  upon  the  tax  sale,  after 
the  lapse  of  a  certain  time,  conclusive  evidence  of  the  sales, 
and  all  proceedings  prior  thereto  valid. 2 

%  336.  New    remedies    for    collection    of  taxes    may    be 
adopted. 

The  State  may  adopt  new  remedies  for  the  collection  of 
taxes  and  apply  them  to  taxes  already  overdue  without  a 
violation  of  the  Federal  Constitution.  The  delinquent  tax- 
payer has  no  vested  right  in  any  existing  mode  of  collecting 
taxes,  and  there  is  no  contract  between  him  and  the  State 
that  the  latter  will  not  vary  the  mode  of  collection.  This 
principle  was  applied  by  the  Supreme  Court,  in  a  recent  case, 
to  the  Texas  act  of  1897  for  the  collection,  by  judicial  pro- 
ceedings, of  taxes  on  real  estate. ^  The  lands  in  this  case  had 
been  purchased  by  the  State  under  the  laws  then  in  force. 
Whether  the  title  acquired  by  the  sale  was  conditional  or 
absolute,  the  State  could  waive  the  rights  conveyed  hy  such 
sale  and  prescribe  terms  upon  which  it  would  waive  them, 
and  the  taxpayer  could  not  complain  1)ecause  he  was  charged 
with  the  ordinary  fees  and  expenses  of  the  lawsuit.  The 
State  could  moreover  provide  that  taxes,  which  had  already 

i  Bennett  v.  Davis,  90  Me.  102. 

2  Hagner  v.  Hall,  10  App.  Div.  N.  Y.  581. 

3  League  v.  Texas,  22  Sup.  Ct.  Rep.  475,  affirming  93  Texas  553. 


398       DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   337 

become  delinquent,  should  bear  interest  from  the  time  that 
the  delinquency  commenced.  Such  a  provision  did  not. 
come  in  conflict  with  the  Federal  Constitution  merely  be- 
cause it  was  retroactive,  for  the  State  can  enact  retroactive 
laws,  provided  they  are  not  ex  post  facto  in  a  technical 
sense  and  do  not  impair  the  obligation  of  a  contract.  The 
Fourteenth  Amendment  has  not  changed  the  rule  in  that 
res)3ect.  As  the  State  can  in  the  first  instance  enact  that 
taxes  shall  bear  interest  from  the  time  they  become  due, 
so,  without  conflicting  with  any  provision  of  the  Federal 
Constitution,  it  nuiy  in  like  manner  provide  that  the  taxes 
which  have  already  become  due  shall  bear  interest  from 
the  time  the  delinquency  commenced.  This  is  adding  no 
extraordinary  penalty,  for  interest  is  the  ordinary  penalty 
for  non-payment  of  obligations. 

§  337.  Effect  of  statutory  conclusiveness  of  tax  deeds. 

The  very  strong  disposition  of  the  Supreme  Court  to 
sustain  the  tax  procedure  of  the  States  is  evidenced  by  its 
rulings  in  cases  where  title  has  been  claimed  under  tax 
deeds,  when  it  has  followed  the  decisions  of  the  State 
courts  as  to  the  construction  of  the  State  statutes.  Thus, 
in  afiirming  a  judgment  of  the  United  States  Circuit  Court 
of  Oregon  in  an  ejectment  suit,i  it  held  that  a  State  legisla- 
ture might  competently  declare  that  a  tax  deed  should  be 
prima  facie  evidence  both  of  the  regularity  of  the  sale, 
and  also  of  all  prior  proceedings  and  of  title  in  the 
purchaser,  but  that  the  legislature  cannot  deprive  one  of 
his  property  by  making  his  adversary's  claim  to  it,  what- 
ever that  may  be,  conclusive  of  its  own  validity,  and  can- 
not therefore  make  the  tax  deed  conclusive  evidence  of  the 
holder's  title  to  the  land. 2 


1  Marxw.  Hanthorn,  148  U.  S.  172. 

2  Citing  Cooley  on  Taxation,  521,  2nd  ed.   1886.    See  also  Bannon  v. 


§  337  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   399 

111  a  later  case  involving  a  tax  title  in  Louisiana,  vrhere 
the  act  made  the  tax  deed  conclusive  of  the  sufficiency  of 
the  assessment,  it  was  claimed  that,  under  the  decision  in 
Marx  V.  Hanthorn,  this  was  a  want  of  due  process  of  law. 
But  the  court  declared  ^  that  Marx  v.  Hanthorn  came  up  from 
the  Circuit  Court  of  the  United  States,  which  followed  the 
construction  given  to  the  tax  laws  of  the  State  from  which 
the  case  came  by  the  Supreme  Court  thereof ;  and  that  it  was 
not  enough  to  make  a  Federal  question  in  a  case  brought 
up  from  the  State  Supreme  Court  to  show  that  that  court 
proceeded  on  a  statutory  conclusive  presumption.  The 
party  must  go  further,  and  show  that  he  was  actually  de- 
prived of  his  property  by  means  of  that  presumption, 
that  is,  the  party  complaining  of  it  must  show  that  if  the 
presumption  had  not  been  entertained  the  assessment  would 
have  been  shown  to  be  invalid;  for  complainant's  right 
was  limited  to  the  single  inquiry  whether  in  the  case  which 
he  presented  the  effect  of  applying  the  statute  was  to  de- 
prive him  of  his  property  without  due  process  of  law. 
The  court  therefore  looked  into  the  alleged  defects,  disre- 
garding the  statutory  presumption,  and  held  that  without  it 
the  defects  were  insufficient  to  sustain  the  claim  of  want 
of  due  process. 

A  statute  making  a  tax  deed  prima  facie  evidence  of 
certain  matters  therein  specified  and  providing  that  a  judg- 
ment for  a  tax  deed  should  be  conclusive  evidence  of  its 
regularity  and  validity  in  collateral  proceedings,  excepting 
in  cases  where  the  taxes  had  been  paid  or  the  real  estate 
was  not  liable,  was  held  valid  by  the  Supreme  Court  of 
Washington  as  a  proper  exercise  of  legislative  power  and 
not  amounting  to  a  taking  of  property  without  due  process' 

Burnes,  39  Fed.   Rep.  892  and   Ball  u.  Ridge    Copper  Co.,  118  Mich.  7. 
As  to  the  conclusiveness  of  recitals  in  bonds  issued  for  public  improve- 
ments, see  Ramish  v.  Hartwell,  126  Cal.  443. 
1  Castillo  V.  McConnico,  168  U.  S.  674. 


400   DUE  PROCESS  OF  LAW  IN   TAXATION  rROCEDURE.  §  338 

of  law.  The  court  decided  also  that  when  a  property  owner 
has  notice  and  an  opportunity  to  defend  before  his  title  is 
actually  divested  by  the  deliver}^  of  a  tax  deed,  the  issuance 
without  notice  to  him  of  a  tax  certificate,  which  the  statute 
declares  shall  have  the  same  force  and  effect  as  a  judgment, 
execution  and  sale,  will  not  constitute  the  taking  of  property 
without  due  process  of  law.i 

§  338.  Essentials    only  considered   lu   reference    to    due 
process  of  law. 

The  principle  has  been  uniformly  declared  that  substance 
and  not  form,  essentials  and  not  non-essentials,  are  to  be 
considered  in  determining  whether  there  is  due  process  of 
law  in  tax  procedure.  This  principle  was  well  illustrated  in 
Castillo  V.  McConnico.  The  court  there  held  that  the  de- 
fects complained  of  were  all  non-essential.  Adding  to  the 
name  of  the  masculine  owner  in  the  advertisement  the  words 
"  or  her  estate  and  heirs  "  did  not  destroy  the  efficacy  of 
the  advertisement,  and  the  State  had  the  power,  without 
violating  the  requirement  of  due  process  of  law,  to  dispense 
with  the  name  in  the  assessment,  substituting  any  such  de- 
scription and  method  as  would  have  been  legally  adequate  to 
convey  either  actual  or  constructive  notice  to  the  owner. 
It  added  at  page  683  :  — 

"  The  vice  which  underlies  the  entire  argument  of  the 
plaintiff  in  error  arises  from  a  failure  to  distinguish  be- 
tween the  essentials  of  due  process  of  law  under  the  Four- 
teenth Amendment,  and  matters  which  may  or  may  not  be 
essential  under  the  terms  of  a  State  assessing  or  taxing  law. 
The  two  are  neither  correlative  nor  coterminous.  The  first, 
due  process  of  law,  must  be  found  in  the  State  statute,  and 
cannot  be  departed  from  without  violating  the  Constitution 
of  the  United  States.     The  other  depends  on  the  law-mak- 

1  state  V.  Whittlesey,  17  Wash.  447. 


§   339    DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.       401 

ing  power  of  the  State,  and  as  it  is  solely  the  result  of  such 
authority  may  vary  or  change  as  the  legislative  will  of  the 
State  sees  fit  to  ordain.  It  follows  that,  to  determine 
the  existence  of  the  one,  due  process  of  law,  is  the  final 
province  of  this  court,  whilst  the  ascertainment  of  the  other, 
that  is,  what  is  merely  essential  under  the  State  statute,  is 
a  State  question  within  the  final  jurisdiction  of  courts  of 
last  resort  of  the  several  States.  When,  then,  a  State 
court  decides  that  a  particular  formality  was  or  was  not 
essential  under  the  State  statute,  such  decision  presents  no 
Federal  question,  providing  always  the  statute  as  thus  con- 
strued does  not  violate  the  Constitution  of  the  United 
States,  by  depriving  of  property  without  due  process  of 
law.  This  paramount  requirement  being  fulfilled,  as  to 
other  matters  the  State  interpretation  of  its  own  law  is  con- 
trolling and  decisive."! 

§  339.  Limitation  and  cvirative  statutes. 

The  State  has  the  constitutional  power  to  enact  statutes 
of  limitation  relating  to  tax  titles  as  well  as  to  any  other 
matter,  provided  that,  as  to  existing  rights  of  action,  the 
limitation  gives  the  claimant  a  reasonable  opportunity  to 
enforce  his  rights  by  suit. 2 

Thus  a  statute  of  New  York  provided  that  deeds  from 
the  Comptroller  of  the  State  for  lands  in  the  forest  reserv- 
ation sold  for  the  non-payment  of  taxes  should,  after  bcino- 
recorded  for  two  years,  in  any  action  brought  more  than 
six  months  after  the  act  took  effect,  be  conclusive  evidence 
that  there  was  no  irregularity  in  the  assessment  of  the 
taxes.     This  was  a  statute  of  limitations,  and  did  not  de- 

1    As  to  the  distinction  between  essentials  and  non-essentials,  see  also 
Lent  V.  Tillson,  140  U.  S.  333,  334. 

2  Wheeler  v.  Jackson,  137  U.  S.  245,  257. 

26 


402      DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.     §   339 

prive  the  former  owner  of  his  property  without  due  process 
of  law.i 

It  was  held  in  Virginia  2  that  a  Liw  enacted  to  give  pur- 
chasers confidence  in  the  sufficiency  of  tax  titles  and  thereby 
to  promote  the  most  efficient  means  to  collect  the  delin- 
quent taxes,  and  which  gave  to  the  land-owner  the  absolute 
right  of  redemption  for  two  years  after  his  land  had  been 
sold  for  the  taxes,  could  not  be  said  to  be  in  contravention 
of  the  Fourteenth  Amendment,  because  it  cut  off  all  de- 
fenses, except  that  the  taxes  were  not  chargeable  or  had 
been  paid. 

A  statute  of  Iowa,  providing  that  a  claimant  under  a  tax 
deed  should  be  barred  if  he  did  not  sue  for  or  take  posses- 
sion of  the  land  within  five  years  after  the  deed  was  executed 
and  recorded,  was  held  valid. ^ 

But  a  limitation  statute,  providing  that  no  action  for  re- 
covery of  land  sold  for  taxes  shall  be  maintained  unless  the 
plaintiff  or  his  predecessor  in  title  was  possessed  of  the 
lands  within  two  years  next  preceding  the  commencement 
of  the  action,  if  construed  to  bar  a  suit  when  the  tax  sale 
appears  on  the  face  of  the  proceedings  to  have  been  void 
and  made  without  authority  of  law,  is  not  consistent  with 
due  process  of  law.*  This  was  the  ruling  of  the  United 
States  Circuit  Court  of  Appeals,  Eighth  Circuit,  in  reference 
to  the  statute  of  Arkansas,  which  the  court  construed  how- 
ever as  not  depriving  the  owner  of  his  right  to  recover 
possession  where  the  tax  proceedings  were  void.  The  court 
said  (41  C.  C.  A.  1.  c.  page  233):  "  It  is  undoubtedly 
competent  for   the  legislative  department  to  enact  reason- 

1  Saranac  Land  &  Timber  Co.  v.  Comptroller  of  New  York,  177  U.  S. 
318.     Following  Turner  v.  New  York,  168  U.  S.  90. 

2  Virginia  Coal  Co.  v.  Thomas,  97  Va.  527. 

3  Barrett  v.  Holmes,  102  U.  S.  651. 

«  Alexanders.  Gordon,  U.  S.  Cir.  Ct.  of  App.,  8th  Cir.,  101  Fed.  Rep. 
92,  and  41  C.  C.  A.  228. 


§  339  DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE.   403 

able  statutes  of  limitatiou,  to  provide  that  the  adverse 
possession  of  lands  for  a  reasonable  time  under  a  tax  or 
judicial  sale  shall  cure  the  mere  irregularities  in  the  pro- 
ceedings upon  which  it  rests.  But  a  provision  that  the 
possession  of  land  for  the  limited  term  of  two  years  under 
a  purchase  at  a  tax  sale  which  clearly  appeared  upon  its  face 
to  be  void  because  the  officer  who  made  it  had  no  jurisdic- 
tion or  authority  to  effect  it,  and  because  it  was  made  for 
taxes  levied  in  excess  of  the  limit  prescribed  by  the  law, 
is  not  process  of  law,  but  is  a  mere  legislative  fiat  and  in 
violation  of  the  fundamental  principle  of  our  jurisprudence. 
If  this  was  the  purpose  and  intent  of  the  legislature  of  Ar- 
kansas in  the  passage  of  this  act  of  limitation,  the  law  could 
not  be  sustained."^ 


1  For  opinion  of  the  Supreme  Court  of  Arkansas  on  the  same  statute 
see  Woolfork  v.  Buckner,  60  Ark.  163,  167. 


CHAPTER  XII. 

DUE  PROCESS  OF  LAW  AND  THE  PUBLIC  PURPOSE  OF 
TAXATION. 

§  340.  Public  purpose  essential  in  taxation. 

341.  Loan  Association  v.  Topelia. 

342.  Municipal  bonds  held  invalid  for  want  of  public  purpose. 

343.  Public  purpose  of  taxation  under  Fourteenth  Amendment. 

344.  Supreme  Court  on  Loan  Association  v.  Topeka. 

345.  City  taxation  of  annexed  farming  lands  sustained. 

346.  What  is  public  purpose  for  taxation? 

347.  Conflicting  judicial  opinions  as  to  public  purpose  necessary   for 

taxation. 

348.  Erection  of  public  sorghum  mills  not  public  purpose. 

349.  Inspiration  of  patriotism  lawful  public  purpose. 

350.  Taxation  for  public  ownership. 

351.  Public  purpose  in  eminent  domain. 

352.  Any    proceeding   dependent  upon  taxation   for  private  purpose 

invalid. 

353.  Railroad  aid  bonds. 

354.  Purpose  of  taxation  must  not  ouly  be  public  but  pertain  to  district 

taxed.  , 

§  340.  Public  purpose  essential  in  taxation. 

Due  process  of  law  in  taxation  requires  more  tlian  cus- 
tomary tax  procedure.  A  tax  has  been  defined  as  a  con- 
tribution enforced  by  the  sovereign  authority  of  the  State, 
according  to  some  rule  of  apportionment,  upon  persons  and 
property  within  its  jurisdiction,  for  the  support  of  govern- 
ment or  other  public  needs.  Due  process  of  law  in  State 
taxation  therefore  requires  that  the  tax  shall  be  levied  for  a 
public  purpose  and  upon  persons  or  property  within  the 
jurisdiction  o:^  the  State.  This  conception  of  a  tax  was  not 
created  by  the  Fourteenth  Amendment  but  inheres  in  the 
nature  of  a  tax,  as  it  is  understood  in  the  jurisprudence  of 
the  political  communities  which  make  up  our  political  sys- 
(404) 


§  340         PUBLIC  PURPOSE  or  TAXATION.  405 

tern.  As  to  the  Fourteenth  Amendment  in  relation  to  these 
fundamental  principles,  the  Supreme  Court  has  said  ^  that 
due  process  of  law  refers  to  that  law  of  the  land  in  eacli 
State  which  derives  its  authority  from  the  inherent  and 
reserve  powers  of  the  State,  exerted  within  the  limits  of 
those  fundamental  principles  of  liberty  and  justice,  which 
lie  at  the  basis  of  all  our  civil  and  political  institutions,  and 
the  greatest  security  for  which  rests  in  the  right  of  the  peo- 
ple to  make  their  own  laws  and  alter  them  at  pleasure.  But 
it  is  not  to  be  supposed  that  these  legislative  powers  are 
absolute  and  despotic,  and  that  the  amendment  prescribing 
due  process  of  law  is  to  be  too  vague  and  indefinite  to  act 
as  a  practical  restraint.  It  is  not  every  act  legislative  in 
form  that  is  law.  Law  is  something  more  than  mere  will 
exerted  as  an  active  power.  Arbitrary  power  enforcing  its 
edicts  to  the  injury  of  the  persons  and  property  of  its  sub- 
jects is  not  law. 

As  taxation  belongs  to  the  legislative  power,  the  determi- 
nation of  the  public  purpose  for  which  taxes  shall  be  levied 
is  primarily  a  matter  for  the  legislature,  but  this  power  is 
not  unlimited.  The  fundamental  principle  that  taxes  can 
be  levied  only  for  public  purposes  had  been  declared  in  the 
State  courts  long  before  the  adoption  of  the  Fourteenth. 
Amendment  and  irrespective  of  any  express  constitutional 
declaration.  The  constitutions  of  some  of  the  States  pro- 
vide in  express  terms  that  taxes  shall  be  levied  for  a  public 
purpose  only,  but  such  declaration  is  unnecessary,  as  a  public 
purpose  is  implied  in  the  conception  of  a  tax. 2 

1  Hurtado  v.  California,  110  U.  S.  51G,  1.  c.  p.  535. 

2  lu  some  early  cases  this  implied  limitation  upon  the  power  of  tax- 
ation was  based  upon  the  constitutional  provision  prohibiting  the  taliing 
of  private  property  for  public  use  without  just  compensation,  see  Cheaney 
V.  Hooser,  9  B.  Monroe  330,  p.  341,  cited  and  followed  in  Wells u.  Wes- 
ton, 22  Mo.  384,  389,  seeinfra,Sec.  345«;  City  of  Covington  ».  Southgate, 
15  B.  Monroe  491. 


406  PUBLIC  PURPOSE  OF  TAXATION.  §  341 

That  a  public  purpose  is  inherent  in  a  tax  is  further  illus- 
trated by  the  fact  that  the  leading  case  in  the  Supreme 
Court,  and  indeed  in  our  jurisprudence,  on  the  subject  of 
the  public  purpose  essential  in  taxation,  to  wit,  that  of  Loan 
Association  v.  Topeka,i  was  not  considered  or  decided  with 
reference  to  the  Fourteenth  Amendment,  but  on  principles 
of  general  constitutional  law.  That  decision  was  rendered 
by  the  court  in  the  exercise  of  its  appellate  jurisdiction  over 
the  Circuit  Courts,  in  a  suit  brought  before  the  Circuit 
Court  for  the  District  of  Kansas  on  bonds  issued  to  an  iron 
works  company  by  the  city  of  Topeka  to  aid  in  their  estab- 
lishing bridge  shops  in  that  city. 

§  341.  Loan  Association  v.  Topeka. 

The  bonds  were  issued  under  authority  of  an  act  of  the 
legislature,  authorizing  certain  cities  "  to  encourage  the 
establishment  of  manufactures  and  such  other  enterprises 
as  may  tend  to  develop  or  improve  the  city,  either  by 
direct  appropriation  from  the  general  funds,  or  by  the 
issuance  of  the  bonds  of  such  city."  A  majority  vote  at 
an  election  was  required.  It  seems  that  all  the  steps  were 
taken,  including  the  election,  the  bonds  were  issued  and 
the  first  interest  coupon  paid.  In  a  suit  upon  the  coupons 
in  the  United  States  Circuit  Court  of  Kansas,  the  defense 
demurred  on  the  grounds,  first,  that  the  statute  violated  the 
constitution  of  Kansas,  and  second,  that  the  act  author- 
ized the  towns  to  take  the  property  of  the  citizens  under 
the  guise  of  taxation,  in  aid  of  enterprises  which  were  not 
of  a  public  nature.  The  Circuit  Court  sustained  the  de- 
murrer, and  the  judgment  was  affirmed  by  the  Supreme 
Court,  in  a  notable  opinion  by  Justice  Miller. 

The    court   declined  to   pass  upon  the  first  point,  as  to 
whether  the  statute  was  authorized  by  the  constitution  of 

1  20  Wallace  655. 


§  341         PUBLIC  PURPOSE  OF  TAXATION.  407 

the  State,  saying  that,  as  it  found  ample  ground  to  sustain 
the  demurrer  on  the  second,  it  preferred  to  base  its  decis- 
ion upon  that.  As  the  contract  could  only  be  fulfilled  hy 
resorting  to  taxation,  its  validity  necessarily  depended  on 
the  power  to  levy  the  tax.  The  court  referred  to  the 
judicial  conflict  over  railroad  aid  bonds,  and  said  that  such 
bonds  had  been  sustained  on  the  ground  that  the  purpose 
was  in  effect  a  public  one.  A  law  authorizing  a  tax  for 
a  purely  private  purpose  is  an  unauthorized  invasion  of 
private  rights.     The  opinion  continued,  page  662:  — 

"  It  must  be  conceded  that  there  are  such  rights  in  every 
free  sfovernment  bevond  the  control  of  the  State.  A  gov- 
ernment  which  recognized  no  such  rights,  which  held  the 
lives,  the  liberty  and  the  property  of  its  citiz^is  subject  at 
all  times  to  the  absolute  disposition  and  unlimited  control 
of  even  the  most  democratic  depository  of  power,  is  after 
all  but  a  despotism.  It  is  true  it  is  a  despotism  of  the 
many,  of  the  majority,  if  you  choose  to  call  it  so,  but  it  is 
none  the  less  a  despotism.  It  may  well  be  doubted  if  a 
man  is  to  hold  all  that  he  is  accustomed  to  call  his  own, 
all  in  which  he  has  placed  his  happiness,  and  the  security 
of  which  is  essential  to  that  happiness,  under  the  unlimi- 
ted dominion  of  others,  whether  it  is  not  wiser  that  this 
power  should  be  exercised  by  one  man  than  by  many. 

"  The  theory  of  our  governments.  State  and  national,  is 
opposed  to  the  deposit  of  unlimited  power  anywhere.  The 
executive,  the  legislative,  and  the  judicial  branches  of  these 
governments  are  all  of  limited  and  defined  powers. 

"  There  are  limitations  on  such  power  which  grow  out 
of  the  essential  nature  of  all  free  governments.  Implied 
reservation  of  individual  rights,  without  which  the  social 
compact  could  not  exist,  and  which  are  respected  by  all 
governments  entitled  to  the  name.  No  court,  for  instance, 
would  hesitate  to  declare  void  a  statute  which  enacted  that 
A.  and  B.  who  were  husband  wife  to  each  other  should  be 


408  PUBLIC  PURPOSE  OF  TAXATION.  §  341 

SO  no  longer,  but  that  A.  should  thereafter  be  the  husband 
of  C,  and  B.  the  wife  of  D.  Or  which  should  enact 
that  the  homestead  now  owned  by  A.  should  no  longer  be 
his,  but  should  henceforth  be  the  property  of  B. 

"  Of  all  the  powers  conferred  upon  government  that  of 
taxation  is  most  liable  to  abuse.  Given  a  purpose  or  ob- 
ject for  which  taxation  may  be  lawfully  used,  and  the  ex- 
tent of  its  exercise  is  in  its  very  nature  unlimited.  It  is 
true  that  express  limitation  on  the  amount  of  tax  to  be 
levied  or  the  things  to  be  tax^d  may  be  imposed  by  con- 
stitution or  statute,  but  in  most  instances  for  which  taxes 
are  levied,  as  the  support  of  government,  the  prosecution 
of  war,  the  National  defense,  any  limitation  is  unsafe.  The 
entire  resourSfes  of  the  people  should  iu  some  instances  be 
at  the  disposal  of  the  government. 

"  The  power  to  tax  is,  therefore,  the  strongest,  the  most 
pervading  of  all  the  powers  of  government,  reaching  di- 
rectl}^  or  indirectly  to  all  classes  of  people.  It  was  said  by 
Chief  Justice  Marshall,  in  the  case  of  McCulloch  v.  The 
State  of  Maryland,  that  the  power  to  tax  is  the  power  to 
destroy.  A  striking  instance  of  the  truth  of  the  proposi- 
tion is  seen  in  the  fact  that  the  existing  tax  of  ten  per 
cent  imposed  by  the  United  States  on  the  circulation  of  all 
other  banks  than  the  National  banks,  drove  out  of  existence 
every  State  bank  of  circulation  within  a  j^ear  or  two  after 
its  passage.  This  power  can  as  readily  be  employed 
against  one  class  of  individuals  and  in  favor  of  another,  so 
as  to  ruin  the  one  class  and  give  unlimited  wealth  and 
prosperity  to  the  other,  if  there  is  no  implied  limitation  of 
the  uses  for  which  the  power  may  be  exercised. 

"  To  lay  with  one  hand  the  power  of  the  government  on 
the  property  of  the  citizen,  and  with  the  other  to  bestow 
it  upon  favored  individuals  to  aid  private  enterprises  and 
build  up  private  fortunes,  is  none  the  less  a  robbery  be- 
cause   it    is    done  under   the  forms  of  law   and   is  called 


§  341         PUBLIC  PURPOSE  OF  TAXATION.  409 

taxation.  This  is  not  legislation.  It  is  a  decree  under 
leo-islative  forms. 

"Nor  is  it  taxation.  A  'tax,'  says  Webster's  diction- 
ary, '  is  a  rate  or  sum  of  money  assessed  on  the  person  or 
property  of  a  citizen  by  government  for  the  use  of  the 
nation  or  State.'  '  Taxes  are  burdens  or  charges  imposed 
by  the  legishiture  upon  persons  or  property,  to  raise  money 
for  public  purposes.'  " 

After  conceding  that  it  is  not  easy  to  decide  in  all  cases 
what  is  a  public  purpose,  and  that  the  courts  are  justified 
in  interposing  only  where  the  case  is  clear,  it  Avas  said, 
page  665 :  — 

"  In  deciding  whether,  in  the  given  case,  the  object  for 
which  the  taxes  were  assessed  falls  upon  the  one  side  or 
the  other  of  this  line,  they  must  be  governed  mainly  by 
the  course  and  usage  of  the  government,  the  objects  for 
which  taxes  have  been  customarily  and  by  long  course  of 
legislation  levied,  what  objects  or  purposes  have  been  con- 
sidered necessary  to  the  support  and  for  the  proper  use  of 
the  government,  whether  State  or  municipal.  Whatever 
lawfully  pertains  to  this  and  is  sanctioned  by  time  and  the 
acquiescence  of  the  people  may  well  be  held  to  belong  to 
the  public  use,  and  proper  for  the  maintenance  of  good 
government,  though  this  may  not  be  the  only  criterion  of 
riohtful  taxation." 

But  it  was  said  that,  in  the  case  at  bar,  no  line  could  be 
drawn  in  favor  of  the  manufacturer,  which  would  not  open 
the  coffers  of  the  public  treasury  to  the  importunities  of 
two-thirds  of  the  business  men  of  the  city  or  town.i 

1  .Tustice  Clifford  dissented  on  the  ground  that  the  courts  had  no 
power  to  declare  an  act  of  the  State  Legislature  void  if  it  was  not  re- 
pugnant to  the  constitution  of  the  State  or  the  Constitution  of  the  Uni- 
ted States,  and  could  not  declare  it  void  on  the  vague  ground  that  they 
thought  it  opposed  to  the  general  spirit  supposed  to  underlie  the  Con- 
stitution. 


410  PUBLIC  PURPOSE  OF  TAXATION.  §  342 

§  342.  Municipal   bonds   lield   invalid  for  want  of  public 
purpose. 

This  case  was  followed  in  others  from  the  Circuit  Courts, 
none  of  them  however  making  any  reference  to  the  Four- 
teenth Amendment.  Thus  in  Cole  v.  LaGrange,  i  a  suit  on 
bonds  issued  to  a  manufacturing  company  in  Missouri,  the 
court  said  that  the  general  grant  of  legislative  power  in 
the  constitution  of  the  State  did  not  enable  the  legislature, 
in  the  exercise  either  of  the  right  of  eminent  domain  or  of 
the  right  of  taxation,  to.  take  private  property  without  the 
owner's  consent  for  any  but  a  public  purpose  ;  nor  can  the 
legislature  authorize  municipal  corporations  to  contract,  for 
private  objects,  debts  which  must  be  paid  by  taxation. 
These  limits  of  legislative  power  were  too  firmly  established 
by  judicial  decisions  to  require  extended  argument  and 
citations.  2 

Bonds  however  issued  under  a  statute  of  Kansas  to  aid 
in  the  subscription  to  a  custom  grist  mill  were  held  valid, ^ 
on  the  ground  that  a  grist  mill  run  by  water  was  a  public 
use,  as  declared  under  the  laws  of  Kansas.* 

But  in  a  later  case  from  Nebraska, »  the  court  held  that 
the  act  of  Nebraska  did  not  authorize  the  issue  of  bonds 

1  113  U.  S.  1. 

2  See  also  Parkersburg  v.  Brown,  106  U.  S.  487. 

3  Burlington  Township  v.  Beasley,  94  U.  S.  310,  Justice  Field  dis- 
senting. 

■*  The  court  said  in  this  case  at  page  313:  "  A  mill  run  by  water  is 
declared  to  be  an  internal  improvement  by  the  statute  we  are  considering. 
It  would  require  a  great  nicety  of  reasoning  to  give  a  definition  of  the 
expression  'iaternal  improvement'  which  would  include  a  grist  mill 
run  by  water  and  exclude  one  operated  by  steam,  or  which  would  show 
that  the  means  of  transportation  were  more  valuable  to  the  people  of 
Kansas  than  the  means  of  obtaining  bread.  It  would  be  poor  consola- 
tion to  the  people  of  this  town  to  give  them  the  power  of  going  in  and 
out  of  the  town  by  railroad,  while  they  were  refused  the  means  of  grind- 
ing their  wheat;"  citing  County  v.  Miller,  7  Kansas  479.  See  also  Blair 
V.  Cuming  Co.,  Ill  U.  S.  363. 

5  Osborne  v.  Adams  County,  106  U.  S.  181. 


§  343         PUBLIC  PURPOSE  OF  TAXATION  411 

for  the  benefit  of  a  steam  grist  mill,  and  tlie    bonds    were 
held  void.i 

The  above  were  all  suits  upon  municipal,  bonds  brought 
in  the  United  States  Circuit  Court  and  decided  with  no 
reference  to  the  Fourteenth  Amendment.  In  nearly  all, 
the  decisions  were  based  upon  the  rulings  of  the  State 
courts.  Justice  Miller  in  Davidson  v.  New  Orleans,  supra, 
§  306,2  speaks  of  the  decision  in  Loan  Association  v.  To- 
peka  as  decided  upon  ' '  principles  of  general  constitutional 
law  "  of  which  the  court  could  take  jurisdiction  when  sitting 
in  review  of  a  Circuit  Court  of  the  United  States,  but  of 
which  it  could  not  take  jurisdiction  in  reviewing  upon  a 
writ  of  error  a  judgment  of  a  State  Supreme  Court. 

§  3^3.  Public    purpose    of    taxation    under    Fourteenth 
Amendment. 

Later  decisions  of  the  court  however  have  distinctly  re- 
ferred the  basis  of  the  decision  in  Loan  Association  v.  To- 
peka  to  the  "  due  process  of  law  "  secured  by  the  Four- 
teenth Amendment,  and  have  questioned  the  power  of  the 
court  to  invalidate  on  any  other  ground  a  State  tax  as 
wanting  in  a  public  purpose,  when  held  valid  by  the  State 
courts.^ 

Thus  in  Hurtado  v.  California,  where  Justice  Matthews 
for  the  court,  in  an  exhaustive  opinion  and  discussion  of  the 
meanino-  of  due  process  of  law  and  the  Fourteenth  Amend- 

1  The  Supreme  Court  of  Nebraska  in  Traver  v.  Merrick  County, 
14  Neb.  327,  held  that  there  was  a  distinction  between  aiding  in  the 
development  of  the  water  power  of  the  State  through  the  assistance 
of  mills  run  by  water  power,  and  aiding  the  mills  propelled  by  steam 
which  could  at  any  time  be  moved  to  another  locality.  See  also  Os- 
borne V.  -Adams  County,  109  U.  S.  1,  on  motion  for  rehearing. 

2  96  U.  S.  97,  1.  c.  105. 

3  Hurtado  y.  California,  110  U.  S.  516;  Maynard  v.  Hill,  125  U.  S. 
205;  Fallbrook  Irrigation  District  v.  Bradley,  164  U.  S.  155;  Missouri 
Pacific  R.  R.  Co.  v.  Nebraska,  164  U.  S.  403. 


412  PUBLIC  PURPOSE  OF  TAXATION.  §  344 

ment,  holds  that  it  does  not  necessarily  require  an  indictment 
by  agrand  juryina Stateprosecutionformurder,thatlearned 
Justice  cites  and  quotes  from  the' opinion  in  Loan  Associa- 
tion v.  Topeka  as  illustrative  of  "the  law  of  the  land," 
which  is  guaranteed  by  "  due  process  of  law,"  and  which 
there  constituted  a  protection  against  arbitrary  power. 

In  Missouri  Pacific  Railroad  Company  v.  Nebraska,  the 
court,  at  page  417,  cites  Loan  Association  v.  Topeka  in 
support  of  the  proposition  that  "  the  taking  by  a  State  of 
the  private  property  of  one  person  or  corporation  without 
the  owner's  consent,  for  the  private  use  of  another,  is  not 
due  process  of  law,  and  is  a  violation  of  the  Fourteenth 
Article  of  Amendment  of  the  Constitution  of  the  United 
States . ' ' 

§  344.  Supreme  Court  on  Loan  Association  v.  Topeka. 

In  the  California  irrigation  case,i  the  Supreme  Court  of 
California  had  adjudged  that  the  purpose  of  the  assessment 
was  public.  But  it  was  contended  that  the  United  States 
Supreme  Court  was  not  concluded  by  this  and  had  the 
power  ' '  under  general  constitutional  law  ' '  to  determine 
whether  the  purpose  was  public  or  private.  The  court 
held  however  that  it  could  only  review  the  decision  of  the 
State  court  on  this  question,  to  determine  whether  the  as- 
sessment was  valid  under  the  Fourteenth  Amendment,  and 
that  it  could  not  overrule  the  State  court  on  principles  of 
general  constitutional  law,  saying,  at  page  155  :  — 

"  We  should  not  be  justified  in  holding  the  act  to  be  in 
violation  of  the  State  constitution  in  the  face  of  clear  and 
repeated  decisions  of  the  highest  court  of  the  State  to  the 
contrary,  under  the  pretext  that  we  were  deciding  princi- 
ples of  general  constitutional  law.  If  the  act  violate  any 
provision,    expressed  or  properly   implied,   of  the   Federal 

1  Fallbrook  Irrigation  District  v.  Bradley,  supra. 


§  344         PUPLIC  PURPOSE  OF  TAXATION.  413 

Constitution,  it  is  our  duty  to  so  declare  it;  but  if  it  do  not, 
there  is  no  justification  for  the  Federal  courts  to  run  coun- 
ter to  the  decisions,  of  the  highest  State  court  upon  ques- 
tions involving  the  construction  of  State  statutes  or 
constitutions,  on  any  alleged  ground  that  such  decisions  are 
in  conflict  with  sound  principles  of  general  constitutional 
law.  The  contrary  has  not  been  held  in  this  court  by  the 
case  of  Loan  Associations.  Topeka,  20  Wall.  655.  In  that 
case  a  statute  of  Kansas  was  held  invalid  because  by  its  pro- 
visions the  property  of  the  citizen  under  the  guise  of  taxa- 
tion would  be  taken  in  aid  of  a  private  enterprise,  which 
was  a  perversion  of  the  power  of  taxation.  The  case  was 
brought  in  the  United  States  Circuit  Court  for  the  District 
of  Kansas,  and  was  decided  by  that  court  in  favor  of  the 
city.  There  had  been  no  decision  of  the  highest  State 
court  upon  the  question  whether  the  act  violated  the  consti- 
tution of  Kansas,  and  consequently  there  was  none  to  be 
followed  by  the  Federal  court  upon  that  question.  This 
court  held  that  a  law  taxing  the  citizen  for  the  use  of  a  private 
enterprise  conducted  by  other  citizens  was  an  unauthorized 
invasion  of  private  rights.  Mr.  Justice  Miller  said  th;it  there 
were  such  rights  in  every  free  government  which  were  beyond 
the  control  of  the  State.  The  ground  of  the  decision  was 
as  stated,  that  the  act  took  the  property  of  the  citizen  for  a 
private  purpose,  although  under  the  forms  of  taxation.  In 
thus  holding,  there  was  no  overruling  or  refusing  to  follow 
the  decisions  of  the  highest  court  of  the  State  respecting  the 
constitution  of  its  own  State. 

"  We  are,  therefore,  practically  confined  in  this  case  to 
the  inquiry  whether  the  act  in  question,  as  it  has  been  con- 
strued by  the  State  courts,  violates  the  Federal  Constitu- 
tion." 

It  was  held  that  the  assessment  was  for  a  public  purpose 
sufficient  to  constitute  due  process  of  law. 


414  PUBLIC  PURPOSE  OF  TAXATION.  §  345 

§  345.  City  taxation  of  annexed  farming  lands  sustained. 

The  doctrine  of  Loan  Association  v.  Topeka  was  unsuc- 
cessfully invoked  in  the  case  of  Kelly  v.  Pittsburgh,!  where 
the  defendant  had  extended  its  boundaries  under  authority 
of  an  act  of  the  legislature  of  Pennsylvania,  by  the  annexa- 
tion of  adjacent  territory.  There  was  included  a  tract  used 
exclusively  for  farm  purposes,  and  which,  on  account  of  its 
distance  from  the  built-up  portion  of  the  city,  was  not 
within  the  reach  of  the  water,  fire,  police  or  other  depart- 
ments of  the  municipal  government.  The  plaintiff  com- 
plained that  the  estimate  of  his  land  for  taxation  was  greatlv 
in  excess  of  its  true  value,  and  that  the  city  tax  was  almost 
destructive  of  his  interest  in  the  property.  The  Supreme 
Court  of  Pennsylvania  sustained  the  validity  of  this  tax, 2 
and  their  judgment  was  affirmed  by  the  Supreme  Court  of 
the  United  States.  Justice  Miller,  delivering  the  opinion, 
said  that  the  cases  cited  from  Kentucky  and  Iowa,  where 
it  had  been  held  that  farm  lands  in  a  city  were  not  subject 
to  ordinary  city  taxes,  were  not  applicable  and  afforded  no 
rule  for  construing  the  Constitution  of  the  United  States. 
It  might  be  true  that  the  plaintiff  did  not  receive  the  same 
amount  of  benefit  from  some  of  these  taxes  as  citizens 
living  in  the  heart  of  the  city,  and  probably  his  tax  bore  a 
very  unjust  relation  to  the  benefits  received.  The  court 
however  added,  p.  82  :  — 

*'  But  who  can  adjust  with  precise  accuracy  the  amount 
which  each  individual  in  an  organized  civil  community  shall 
contribute  to  sustain  it,  or  can  insure  in  this  respect 
absolute  equality  of  burdens,  and  fairness  in  their  dis- 
tribution among  those  who  must  bear  them? 

"  We  cannot  say  judicially  that  Kelly  received  no  benefit 
from  the  city  organization.     These  streets,  if  they  do  not 

1  104  U.  S.  78. 

2  A  strong  dissenting  opinion  was  filed  in  Pennsylvania  by  Agnew, 
Cli.  J.,  85  Pa.  180,  27  American  Reports  633. 


§  345         PUBLIC  PURPOSE  OF  TAXATION.  415 

penetrate  his  farm,  lead  to  it.  The  water-works  will 
probably  reach  him  some  day,  and  may  be  near  enough  to 
him  now  to  serve  him  on  some  occasion.  The  schools  may 
receive  his  children,  and  in  this  regard  he  can  be  in  no 
worse  condition  than  those  living  in  the  city  who  have  no 
children,  and  yet  who  pay  for  the  support  of  the  schools. 
Every  man  in  a  county,  a  town,  a  city,  or  a  State,  is 
deeplj^  interested  in  the  education  of  the  children  of  the 
community,  because  his  peace  and  quiet,  his  happiness  and 
prosperity,  are  largely  dependent  upon  the  intelligence 
and  moral  training  which  it  is  the  object  of  public  schools 
to  supply  to  the  children  of  his  neighbors  and  associates  if 
he  has  none  himself. 

"  The  officers  whose  duty  it  is  to  punish  and  prevent 
crime  are  paid  out  of  the  taxes.  Has  he  no  interest  in 
maintaining  them,  because  he  lives  further  from  the  court 
house  and  police  station  than  some  others? 

"  Clearly,  however,  these  are  matters  of  detail  within 
the  discretion,  and  therefore  the  power,  of  the  law-making 
body  within  whose  jurisdiction  the  parties  live.  This  court 
cannot  say  in  such  cases,  however  great  the  hardship  or 
unequal  the  burden,  that  the  tax  collected  for  such  purposes 
is  taking  the  property  of  the  taxpayer  without  due  pro- 
cess of  law."  1 

1  See  alsoTaggart  v.  Claypool,  145  Ind.  696,  and  32  L.  R.  A.  586,  fol- 
lowing and  applying  Kelly  v.  Pittsburgh.  The  rulings  in  the  State 
courts  upon  this  difHcult  question  of  the  power  of  the  State  legislatures 
in  the  absence  of  constitutional  restriction  to  annex  and  subject  farm- 
ing lands  to  ordinary  municipal  taxation,  are  collated  by  Judge  Dillon, 
2  Mun.  Corp.,  4th  Ed.,  Section  795.  He  says :  "  It  must  be  admitted  that 
in  the  absence  of  specific  constitutional  restrictions  the  difficulties  in 
the  way  of  pronouncing  such  legislation  unconstitutional  or  of  affording 
judicial  relief  in  such  cases  are  almost  unsurmountable."  See  also 
cases  collected  in  note  to  State  ex  rel.  Richards  u.  Cincinnati  (Ohio), 
27  L.  R.  A.  737. 

The  Supreme  Court  of  Missouri  held  in  1856  that  the  legislature  could 
not  authorize  a  municipal  corporation  to  tax  for  its  own  local  purposes 
lands  lying  beyond  its  corporate  limits,  Wells  v.  Weston,  22  Mo.  385. 


416  PUBLIC  PURPOSE  OF  TAXATION.  §  346 

§  346.  What  is  public  purpose  for  taxation? 

While  the  declaration  of  the  legislature  that  a  tax  is  laid 
for  a  public  purpose  must  necessarily  be  given  great  weight, 
as  taxation  is  essentially  a  legislative  power,  such  declara- 
tion is  not  conclusive.  It  is  the  universal  holding  however 
that  courts  are  justified  in  interposing  only  when  it  clearly 
appears  that  the  supreme  law  governing  both  the  legislature 
and  the  judiciary  would  be  violated  by  the  enforcement  of 
the  legislative  purpose.  In  determining  what  is  a  public 
purpose,  as  was  said  in  the  Topeka  case,  the  courts  are 
governed  mainly  by  the  course  and  usages  of  the  govern- 
ment, the  objects  for  which  taxes  have  been  customarily 
and  by  long  course  of  legislation  levied,  and  what  objects 
and  purposes  have  been  considered  necessary  for  the  sup- 
port and  proper  use  of  the  government,  whether  State  or 
municipal.  "  Whatever  lawfully  pertains  to  this,  and  is 
sanctioned  by  time  and  acquiescence  of  the  people  may  well 
be  held  to  belong  to  the  public  use  and  proper  for  the 
maintenance  of  good  government,  though  this  may  not  be 
the  only  criterion  of  rightful  taxation."  i 

In  the  language  of  the  Supreme  Court  of  Michigan,^  the 
public  purpose  of  taxation  does  not  relate  to  the  urgency 
of  the  public  need,  or  to  the  extent  of  the  public  benefit, 
but  the  term  is  used  to  distinguish  the  objects  for  which, 
according  to  settled  usage,  the  government  is  to  provide, 
from  those  which,  by  the  like  usage,  are  left  to  private  in- 
clination, interest  or  liberality. 

The  public  purpose  which  wiU  warrant  the  exercise  of 
the  taxing  power  is  that  which  is  sustained  by  the  prevail- 
ino-  and  controlling  public  opinion  of  the  time ;  not  the 
public  opinion  in  the  popular  sense,  which  is  conclusively 
reflected   in  the  expression  of  the  legislative  will,  but  the 

1  Quoted  by  the  Supreme  Court  of  Missouri  in  State  ex  re),  v.  Switzler, 
143  Mo.  317. 

2  People  V.  Salem,  20  Mich.  452,  1.  c.  p.  485. 


§  347         PUBLIC  PURPOSE  OF  TAXATION.  417 

trained  and  thoughtful  judicial  opinion.  The  public  opin- 
ion of  one  age  or  generation  however,  as  reflected  in 
judicial  opinions  concerning  the  proper  scope  of  govern- 
mental activit}^  or  as  to  Avhat  are  the  public  purposes 
of  taxation,  is  not  the  public  opinion  of  another  age  or 
of  another  generation.  Upon  these  questions  our  juristic 
conceptions  must  tend  to  harmonize  with  the  well-settled, 
all-powerful  influences  of  public  opinion  in  a  popular 
sense.  In  the  words  of  Mr.  Lowell,  "  our  written  con- 
stitutions are  an  obstacle  to  the  wdiim,  but  not  to  the  will 
of  the  people." 

The  development  of  judicial  opinion  upon  this  subject 
may  be  illustrated  by  selections  from  a  few  of  the  more 
notable  opinions  of  the  many  that  have  been  announced 
in  the  courts. 

§  347.  Conflicting  judicial  opinions  as  to  public  purpose 
necessary  for  taxation. 

It  was  held  in  1875,  by  the  Supreme  Court  of  Kansas, 
opinion  by  Judge  Brewer,  now  of  the  United  States 
Supreme  Court, i  that  a  statute  of  that  State  enacted  after 
a  crop  failure,  authorizing  the  issue  of  bonds  to  raise 
money  for  the  purchase  of  seed  corn  to  be  given  to  the 
farmers,  was  invalid  as  authorizing  taxation  for  a  purpose 
which  was  not  public.  The  provision  of  the  State  Con- 
stitution authorizing  appropriations  for  the  support  of  the 
poor  was  held  to  be  limited  to  giving  aid  to  paupers. 
The  argument  that  the  prevention  of  pauperism  is  a  public 
purpose  was  dangerous  and  unsound,  and  the  securing  of 
loans  to  persons  temporarily  embarrassed  is  not  a  public 
purpose. 

But  the   Supreme  Court    of  North  Dakota  in  1890  held 

1  State  V.  Osawkee  Township,  14  Kansas  418. 

27 


418  PUBLIC  PURPOSE  OF  TAXATION.  §  347 

a  similar  statute  was  valid, i  declining  to  follow  the  Kansas 
case  and  saying,  1.  c.  p.  97  :  — 

"In  our  view  it  is  not  certain  or  even  probable,  in  the  light 
of  subsequent  experience  in  the  west,  that  the  court  of  last 
resort  in  the  State  of  Kansas  would  enunciate  the  doctrine 
of  that  case  at  the  present  day.  The  decision  was  made 
fifteen  years  ago.  While  the  fundamental  principles  which 
underlie  legislation  and  taxation  have  not  changed  in  the 
interval,  it  is  also  true  that  the  development  of  the  west- 
ern States  has  been  attended  with  difficulties  and  adverse 
conditions  which  have  made  it  necessary  to  broaden  the  ap- 
plication of  fundamental  principles  to  meet  the  new  necessi- 
ties of  those  States." 

After  reviewing  the  legislation  of  Minnesota  on  the  same 
subject,  the  court  continued,  at  page  99  :  — 

"  This  review  of  legislation  in  aid  of  destitute  farmers  will 
serve  to  illustrate  the  well-known  fact  that  legislation  under 
the  pressure  of  public  sentiment,  born  of  stern  necessity, 
will  adapt  itself  to  new  exigencies,  even  if  in  doing  so  a 
sanction  is  given  to  a  broader  application  of  elementary 
principles  of  government  than  has  before  been  recognized 
and  applied  by  the  court  in  adjudicated  cases.  It  is  the 
boast  of  the  common  law  that  it  is  elastic,  and  can  be  ad- 
justed to  the  development  of  new  social  and  business  con- 
ditions. Can  a  statute  enacted  for  such  broadly  humane 
and  charitable  purposes  be  annulled  by  another  branch  of 
the  government  as  an  abuse  of  legislative  discretion?  We 
think  otherwise." 

The  court  lays  stress  upon  the  language  of  the  State  con- 
stitution permitting  the  legislature  to  lend  aid  "for  the 
necessary  support  of  the  poor,"  and  upon  the  fact  that 
this  peculiar  language  was  introduced  into  the  constitutions 
of  North  and  South  Dakota,  although  nothing  of  the  kind 

1  North  Dakota  v.  Nelson  County,  1  N.  Dak.  88. 


§  347         PUBLIC  PURPOSE  OF  TAXATIOX.  419 

appeared  in  analogous  sections  of  other  State  constitutions. 
It  found  a  reason  for  this  in  the  peculiar  and  alarming  con- 
ditions of  the  people  of  the  Dakota  Territor}^  in  1889  when 
their  constitutions  wci-e  formed.  The  seed  grain  statute 
was  therefore  declared  to  be  a  valid  enactment. 

A  decision  by  the  Supreme  Court  of  Missouri  in  1898 
enforces  the  limitation  of  the  power  of  taxation  with  refer- 
ence to  the  higher  education.  A  tax  levied  under  an  act 
entitled  "  For  the  Endowment  of  the  State  University,"  the 
proceeds  whereof  were  to  be  applied  in  defraying  the  ex- 
penses at  the  University  of  students  without  means,  who 
should  be  awarded  scholarships  of  merit  through  competi- 
tive examinations,  was  held  to  be  invalid  as  levying  a  tax 
for  private  persons  and  not  for  a  public  purpose.!  Xhe 
constitution  of  Missouri  directs  the  maintenance  of  the 
State  University,  and  it  was  urged  that,  as  scholarships  are 
a  recognized  and  historic  incident  of  University  endowment, 
this  method  of  maintenance  of  the  University  and  making 
it  serviceable  in  the  education  of  the  talent  of  the  State 
is  within  the  discretion  of  the  legislature,  which  cannot 
be  reviewed  by  the  judiciary.  There  is  no  difference  in 
principle,  it  was  contended,  between  building  dormitories 
for  students  to  live  in  and  paying  professors  to  teach  them, 
as  is  done  under  existing  law,  and  endowing  scholarships  so 
that  deserving  students  without  means  can  have  the  benefit 
of  the  instruction.  But  the  court  said  that  the  act  "  en- 
dowed the  students,  not  the  University,"  and  was  therefore 
a  paternalistic  gift  of  public  money  to  private  individuals ; 
and  that  it  could  find  no  warrant  for  this  endowment  of 
scholarships,  either  in  the  organic  law  of  the  State,  or  in 
the  character  of  our  government. 

On  the  other  hand,  it  has  been  held  that  the  maintenance 

1  State  ex  rel.  v.  Switzler,  143  Mo.  287. 


420  PUBLIC  PURPOSE  OF  TAXATION.  §  348 

not  only  of  public  ^  and  high  schools,^  but  also  of  Normal 
schools  ,3  is  a  public  purpose  for  which  the  power  of  taxa- 
tion may  be  invoked,  but  the  contrary  is  true  of  mere 
priA'ate  schools.^  In  the  language  of  Judge  Cooley  ^  in  the 
Supreme  Court  of  Michigan  :  — 

"  Necessity  alone  is  not  the  test  by  which  the  limits  of 
the  State's  authority  in  this  direction  are  to  be  defined, 
but  a  wise  statesmanship  must  look  beyond  the  expenditures 
which  are  absolutely  needful  to  continue  the  existence  of 
organized  government  and  embrace  those  which  may  tend 
to  make  that  government  subserve  the  general  well-being 
of  society  and  advance  the  present  and  prospective  happi- 
ness and  prosperity  of  the  people." 

§  348.  Erection  of  public  sorghum  mills  not  public  pur- 
pose. 

In  a  recent  decision  the  United  States  Circuit  Court  of 
Appeals  of  the  Eighth  Circuit,  in  an  exhaustive  opinion 
by  Judge  Sanborn ,6  decided  that  bonds  authorized  by  the 
legislature  of  Kansas,  upon  vote  of  the  electors  of  the 
township,  issued  to  pay  a  subscription  to  the  capital  stock 
of  a  corporation  organized  to  erect  public  sorghum  mills, 
were  invalid,  and  that  the  tax  required  was  not  for  a  public 
purpose.  Iir  this  case  the  act  declared  that  all  mills  that 
received  the  aid  were  public  mills  and  should  manufacture 
sugar  or  syrup  for  customers.  The  court  said  that  the 
limits  of  the  power  to  tax  are  by  no  means  the  limits  of 
the  police  power  of   the  State,  and  added  at  page  668  :  — 

1  Commonwealths.  Ilartman,  17  Pa.  118. 

2  Richards  v.  Raymond,  92  111.  612. 
3'BFiggsu.  Johnson  County,  4  Dillon  148. 
4  Curtis  V.  Whipple,  24  Wise.  350. 

s  People  V.  Salem,  20  Mich.  452. 

6  Dodge  V.  Mission  Township,  46  C.  C.  A.  661,  54  L.  R.  A.  242,  decided 
April,  1901. 


§  348         PUBLIC  PUEPOSE  OF  TAXATION.  421 

"  Many  private  occupatioas,  as  the  sale  of  intoxicants, 
the  driving  of  carriages  for  hire  and  the  construction  of 
private  buildings  along  the  streets  of  a  city,  bear  such  a 
relation  to  the  public  welfare  that  they  may  be  regulated 
under  the  police  power  of  a  State,  when  there  is  an  entire 
absencQ  of  power  in  its  legislature  to  tax  the  property  of 
its  citizens  to  promote  or  maintain  these  enterprises." 

The  court  in  this  case  distinguished  the  decision  of  the 
Supreme  Court  in  Burlington  To^vnship  v.  Beasley,  supra, 
§  342,  which  held  that  the  erection  of  custom  grist  mills 
was  a  public  purpose,  saying  that  the  bonds  in  that  case 
did  not  show  on  their  face  for  which  of  the  purposes 
named  in  the  act  they  were  issued.  On  the  question 
whether  a  custom  grist  mill  operated  by  steam  is  a  work 
of  internal  improvement,  the  court  declared  that  on 
this  point  the  Burlington  Township  case  illustrates,  not 
the  general  rule,  but  an  exception  thereto,  and  said,  I.e. 
p.  665  :  "  This  decision  is  the  outgrowth  of  a  more  primi- 
tive state  of  society  when  there  were  no  railroads  and  few 
good  highways,  and  when  custom  grist  mills  in  the  imme- 
diate neighborhoods  of  productive  tields  to  grind  grain  for 
bread  for  the  people  and  for  food  for  the  cattle  were  a 
public  necessity.  In  this  state  of  affairs  a  line  of  decisions 
was  developed  to  the  effect  that  aid  in  the  construction  and 
maintenance  of  custom  grist  mills  driven  by  water,  and  the 
development  of  the  necessaiy  water  power  to  propel  them, 
was  a  public  object,  for  which  taxes  might  be  la\vfully 
levied  upon  the  property  of  all  the  citizens.  Guernsey  v. 
Burlington  Township,  4  Dill.  375,  Fed.  Cas.  No.  5,855; 
Harding  v.  Funk,  8  Kan.  315.  The  Burhngton  Tp.  Case, 
perhaps,  advanced  another  step,  for.  the  decison  was  that 
the  promotion  of  a  grist  mill  propelled  by  steam,  as  well  as 
one  propelled  by  water,  was  a  public  purpose.  This  prop- 
osition, however,  together  with  the  entire  line  of  decisions 
upon  which  it  rests,  forms  an  exception  to  the  general  rule 


4:22  PUBLIC  PURPOSE  OF  TAXATION.  §  349 

upon  this  subject,  is  inapplicable  to  the  public  needs  and 
purposes  of  this  day,  and  ought  not  to  be  enlarged."  i 

After  citing  the  later  decisions  of  the  Supreme  Court 
noted  above,  the  court  said:  "These  decisions  show  the 
narrow  limits  and  sharp  lines  which  confine  this  exception 
to  the  general  rule."^  ^ 

§  349.  Inspiration  of   patriotism  lawfnl  public  purpose. 

Whatever  legitimately  tends  to  inspire  patriotic  senti- 
ments, and  to  enhance  the  respect  of  citizens  for  the  insti- 
tutions of  their  country,  and  incites  them  to  contribute  to 
its  defense  in  time  of  war,  has  been  held  to  be  a  lawful 
public  purpose,  such  as  will  justify  the  exercise  either  of 
the  power  of  taxation  or  of  the  power  of  eminent  domain. ^ 


1  The  payment  of  a  sugar  bounty  for  the  encouragement  of  the  in- 
dustry was  held  void,  Michigan  Sugar  Co.  v.  Auditor  General,  124  Mich. 
674. 

2  The  opinion  in  this  case  contains  a  valuable  review  of  the  decisions 
upon  this  subject.  See  Deal  v.  Mississippi  County,  107  Mo.  464,  and  14 
L.  R.  A.  622,  holding  invalid  a  bounty  for  planting  forest  trees.  As 
there  was  no  right  in  the  public  to  the  trees  or  their  use  and  control, 
the  act  was  held  void. 

In  Lowell  v.  Boston,  111  Mass.  454,  an  issue  of  bonds  for  $20,000,000 
for  the  purpose  of  loaning  money  to  the  owners  of  land  burned  over  in 
the  great  fire  of  1872  conditioned  upon  their  rebuilding  within  a  year,  the 
loans  to  be  secured  by  mortgage,  was  enjoined  as  not  for  a  public 
purpose. 

Allen  V.  Jay,  60  Me.  124,  held  that  the  loan  of  credit  for  removing  a 
steam  saw  mill,  box  factory  and  grist  mill  to  the  village  was  not  for  a 
public  purpose.  No  distinction  apparently  was  made  between  a  saw 
mill  and  a  grist  mill,  both  being  industries  pursued  for  private  gain  and 
emolument. 

In  Weismer  v.  Douglas,  64  N.  Y.  91,  bonds  issued  for  the  purpose  of 
paying  a  subscription  to  stock  of  a  lumber  factory,  which,  it  was  claimed, 
would  increase  the  value  of  adjacent  property  and  promote  business  by 
cleaning  out  the  channel  of  the  river  and  constructing  piers,  were  held 
void.  See  also  Martha  v.  Ottawa,  114  111.  59;  Coates  v.  Campbell,  37 
Minn.  498;  Geneseo  v.  Geneseo  Company,  55  Kans.  358. 

3  United  States  v.  Gettysburg  Electric  K.  Co.,  160  U.  S.  668. 


§  349         PUBLIC  PURPOSE  OF  TAXATION.  423 

Ou  this  ground  and  for  the  further  reason  that  the  public 
taste  is  educated  thereby,  the  expenditure  of  public  moneys 
for  the  promotion  of  State  exhibits  at  World's  Fairs  has 
been  sustained.! 

A  tax  for  raising  money  to  pay  bounties  to  soldiers  in 
order  to  encourage  enlistments  in  time  of  war  is  valid,  but 
a  tax  for  the  payment  of  substitutes  for  individuals  to  en- 
able them  to  escape  conscription, 2  and  for  the  payment  of 
bounties  to  soldiers  after  the  war,  as  a  testimonial  of  the 
public  appreciation  of  their  services,  were  held  to  be  with- 
out consideration  and  void.^ 

The  public  purpose  however,  to  warrant  the  exercise  of 
the  power  of  taxation  must  be  one  which  appeals  to  all  the 
people  and  is  not  in  any  sense  partisan.  This  distinction 
was  forcibly  illustrated  in  a  recent  Massachusetts  case.  An 
act  of  the  legislature  authorized  the  city  of  Brockton  to 
erect  a  Memorial  Hall  to  the  memory  of  the  soldiers  and 
sailors  of  the  Civil  War.  This  was  held  to  be  a  valid  stat- 
ute, because  the  education  of  the  public  taste  and  inspiring 
sentiments  of  patriotism  in  the  public  mind  serve  to  pro- 
mote the  general  welfare.*  The  city  council  however,  under 
authority  of  the  statute,  passed  an  ordinance  appropri- 
ating money  for  a  Memorial  Hall  and  Library  building  to 
be  used  in  part  by  a  G.  A.  R.  Post.  The  court  held 
with  regard  to   this   appropriation  that  it  was  not  for  a 

1  Daggett  V.  Colgan,  92  Cal.  53,  and  14  L.  R.  A.  475,  where  the 
note  contains  an  interesting  collation  of  the  State  decisions  on  this 
subject.  Justice  Sanborn,  in  the  United  States  Circuit  Court  of  Ap- 
peals recently,  July,  1902,  in  chambers  at  St.  Paul,  denied  an  injunc- 
tion against  condemnation  proceedings  for  the  World's  Fair  in  St. 
Louis  for  the  celebration  of  the  Louisiana  Purchase  Centennial  In  1904. 

2  Freeland  v.  Hastings,  10  Allen  570. 

2  See  Booth  V.  Woodbury,  32  Conn,  118;  Mead  v.  Acton,  139  Mass. 
341.  The  conduct  of  an  agricultural  exhibition  and  the  payment  of 
premiums  therein  constitute  a  lawful  purpose  for  taxation,  State  ex 
rel.  V.  Robinson,  35  Neb.  401,  and  17  L.  R.  A.  383. 

4  Kingman  v.  Brockton,  153  Mass.  255,  and  II  L.  R.  A.  123. 


424  PUBLIC  PURPOSE  OF  TAXATION.  §  350 

public  purpose,  and  that  there  is  no  definition  of  a  pubhc 
purpose  and  use  which  includes  the  support  and  maintenance 
of  a  Grand  Army  Post,  saying  (11  L.  K.  A.  1.  c.  125)  : 
"  If  once  the  principle  is  adopted  that  a  city  or  town  may 
be  authorized  to  raise  money  by  taxation  for  conferring 
benefits  on  individuals  merely  because  in  the  past  they  have 
rendered  important  and  valuable  services  for  the  benefit  of 
the  general  public,  occasions  will  not  be  wanting  which  will 
appeal  strongly  to  the  popular  sense  of  gratitude  or  to  the 
popular  emotion  and  the  interests  and  just  rights  of  minor- 
ities will  be  in  danger  of  being  disregarded." 

§  350.  Taxation  for  public  ownership. 

The  association  of  the  legal  view  as  to  what  constitutes 
a  public  purpose  in  taxation  with  the  prevaihng  public 
oiDinion  as  to  the  scope  of  governmental  activity  was  forci- 
bly illustrated  recently  in  Massachusetts,  in  the  opinions  of 
the  Justices  of  the  Supreme  Court  rendered  to  the  House 
of  Representatives  of  the  legislature,  under  provision  of 
the  State  constitution  authoriziug  the  justices  to  be  thus 
interrogated  as  to  the  lawful  powers  of  the  legislature. 
The  question  was  submitted,  whether  the  legislature  under 
the  State  constitution  could  authorize  cities  and  towns  to 
manufacture  and  distribute  gas  and  electricity  for  use  in 
their  public  streets  and  buildings  and  for  sale  to  the 
inhabitants.  The  justices  answered :i  "If  the  legislature 
is  of  opinion  that  the  common  convenience  and  welfare  of 
the  inhabitants  will  be  promoted  by  conferring  upon  the 
municipalities  the  power  of  manufacturing  and  distributing 
gas  or  electricity  for  the  purpose  of  furnishing  light  to 
their  inhabitants,  we  think  the  legislature  can  confer  the 
power." 

But  subsequently  the  House  of  Representatives  submitted 

1  Opiniou  of  Justices,  150  Mass.  592,  8  L.  R.  A.  487. 


§  350         PUBLIC  PURPOSE  OF  TAXATION.  425 

to  the  justices  the  further  question  whether  power  could  be 
conferred  by  the  legislature  upon  cities  and  towns  to  bu}^ 
and  sell  coal  and  wood  for  fuel  for  their  inhabitants. 
Five  of  the  seven  judges  concurred  in  the  answer,  that 
such  a  power  could  not  be  lawfully  conferred  by  the  legis- 
lature, as  it  was  not  a  public  service  within  the  meaning  of 
'the  rule  that  taxes  can  be  laid  only  for  public  purposes. 
The  opinion  quoted  the  preamble  of  the  State  constitution 
declaring  that  "the  end  of  the  institution,  maintenance,  and 
administration  of  government  is  to  secure  the  existence  of 
the  body  politic ;  to  protect  it,  and  furnish  the  individuals 
who  compose  it  with  the  power  of  enjoying  in  safety  and 
tranquillity  their  natural  rights,  and  the  blessings  of  life." 
"  That  all  men  are  born  free  and  equal,  and  have  certain 
natural,  essential,  and  inalienable  rights,  among  which 
may  be  reckoned  the  rights  of  enjoying  and  defending  their 
lives  and  liberties ;  that  of  acquiring,  possessing,  and  pro- 
tecting property ;  in  fine,  that  of  seeking  and  obtaining 
their  safety  and  happiness."  And  the  opinion  continued 
(15  L.  R.  A.,  p.  810):  — 

' '  Constitutional  questions  concerning  the  power  of  taxa- 
tion, necessarih'-  are  largely  historical  questions.  The  Con- 
stitution must  be  interpreted  as  any  other  instrument,  with 
reference  to  the  circumstances  under  which  it  was  framed 
and  adopted.  It  is  not  necessary  to  show  that  the  men  who 
framed  it  or  adopted  it  had  in  mind  everything  which  by 
construction  may  be  found  in  it,  but  some  regard  must  be 
had  to  the  modes  of  thought  and  action  on  political  subjects 
then  prevailing;  to  the  discussions  upon  the  nature 
of  the  government  to  be  established;  to  the  meaning 
of  the  language  used,  as  then  understood;  and  to  the 
grounds  on  which  the  adoption  or  rejection  of  the  Constitu- 
tion was  advocated  before  the  people.  We  know  of  nothing 
in  the  history  of  the  adoption  of  the  Constitution  that  gives 
any  countenance  to  the  theory  that  the  buying  and  selling 


426  PUBLIC  PURPOSE  OF  TAXATION.  §  351 

of  such  articles  as  coal  and  wood  for  the  use  of  the  inhabit- 
ants was  regarded  at  that  time  as  one  of  the  ordinary  func- 
tions of  the  government  which  was  to  be  established. ' ' 

The  court  said  that  there  was  nowhere  in  the  Constitution 
any  provision  which  tended  to  show  that  the  government 
was  established  for  the  purpose  of  carrying  on  the  buying 
and  selling  of  such  merchandise,  as,  at  the  time  when  the 
Constitution  was  adopted,  was  usually  bought  and  sold  by 
individuals  and  with  which  individuals  were  able  to  supply 
the  community,  no  matter  how  essential  the  business  might 
be  to  the  welfare  of  the  inhabitants.  After  reviewing-  the 
precedents  in  the  State  from  colonial  times,  the  opinion 
concluded,  at  page  812:  — 

"  If  there  be  any  advantage  to  the  inhabitants  in  buying 
and  selling  coal  and  wood  for  fuel  at  the  risk  of  the  com- 
munity on  a  large  scale,  and  on  what  has  been  called  the 
*  co-operative  plan,'  we  are  of  the  opinion  that  the  Consti- 
tution does  not  contemplate  this  as  one  of  the  ends  for 
which  the  government  was  established,  or  as  a  public  service 
for  which  cities  and  towns  may  be  authorized  to  tax  their 
inhabitants.  We  therefore  answer  the  question  in  the 
negative."  i 

§  3ol.  Public  purpose  in  eminent  domain. 

The  public  purpose  necessary  in  the  condemnation  of 
private    property  is  analogous  to  that  required  in  taxation. 

1  Opinion  of  the  Justices,  155  Mass.  598,  and  15  L.  R.  A.  809.  In  this 
case  Judge  Holmes,  now  of  the  Supreme  Court  of  the  United  States,  dis- 
sented, saying:  "  I  am  of  opinion  that  when  money  is  taken  to  enable  a 
public  body  to  offer  to  the  public  without  discrimination  an  article  of 
general  necessity,  the  purpose  is  no  less  public  when  that  article  is 
wood  or  coal  than  when  it  is  water  or  gas  or  electricity  or  education, 
to  say  nothing  of  cases  like  the  support  of  paupers  or  the  taking  of  land 
for  railroads  or  public  markets.  I  see  no  ground  for  denying  the  power 
of  the  legislature  to  enact  the  laws  mentioned  in  the  questions  proposed. 
The  need  or  expediency  of  such  legislation  is  not  for  us  to  consider." 
Judge  Barker  answered:  "  My  answer  to  the  question  propounded  is 


§  351         PUBLIC  PURPOSE  OF  TAXATION.  427 

lu  both  cases  the  legislative  determination  will  be  respected 
by  the  court  but  will  not  be  conclusive.  A  distinction  how- 
ever has  been  made  by  high  authority  i  between  the  public 
purpose  in  condemnation  and  that  in  taxation,  to  the  effect 
that  a  more  liberal  construction  of  public  purposes  is  allowed 
in  the  former  than  in  the  latter. 2 

This  distinction  was  thus  summarized  by  the  Supreme 
Court  of  Massachusetts  in  the  opinion  of  the  Justices 
upon  the  power  of  the  legislature  to  manufacture  gas  and 
electricity  (8  L.  R.  A.  I.  c.  p.  488)  :  — 

"  The  extent  of  the  right  of  taxation  is  not  necessarily 
to  be  measured  by  that  of  the  right  of  eminent  domain, 
but  the  rights  are  analogous.  Private  property  can  be 
taken  without  the  consent  of  the  owner  ©nly  for  public 
uses,  and  the  owner  must  be  paid  full  compensation  there- 
for; otherwise  he  would  contribute  more  than  his  propor- 
tionate share  toward  the  public  expenses.  By  taxation  the 
inhabitants  are  compelled  to  part  with  their  property,  but 
the  taxation  must  be  proportional  and  reasonable,  and  for 
public  purposes.  Taxes  may  be  imposed  upon  all  the  in- 
habitants of  the  State  for  general  public  purposes,  or  upon 
the  inhabitants  of  defined  localities  for  local  purposes,  and 
when  distinct  private  benefits  are  received  from  public 
works  special  assessments  may  be  laid  upon  individuals." 

It  was  held  by  the  Supreme  Court  ^  that  the  United 
States  had  authority  under  the  Fifth  Amendment  to  con- 
demn land  for  the  purpose  of  preserving  and  suitably 
marking  the  battlefield  of  Grettysburg,  and  that  any  act 
which  may  indirectly  tend  to  enhance  the  respect  of  the 

therefore,  'Yes,  if  the  necessities  of  society  as  now  organized  can  be 
met  only  by  the  adoption  of  such  measures,'  and  '  No  if  there  is  no  such 
necessity,  but  merely  an  expediency  for  the  trial  of  an  experiment.'  " 

1  People  V.  Township  Board  of  Salem,  20  Mich.  452. 

-  Cooley  on  Taxation,  p.  76. 

3  United  States  u.  Gettysburg  Electric  Ry.  Co.,  IGO  U.  S.  668. 


428  PUBLIC  PURPOSE  OF  TAXATION.  §  352 

local  citizens  for  the  institutions  of  their  country  and 
quicken  and  strengthen  their  motives  to  defend  them  con- 
stitutes a  legitimate  public  purpose. 

But  an  act  of  the  State  of  Nebraska,  which,  as  con- 
strued by  the  Supreme  Court  of  the  State,  authorized  the 
Board  of  Transportation  to  require  a  railroad  company, 
which  had  permitted  the  erection  of  two  elevators  by  pri- 
vate persons  on  its  right  of  .  way  at  a  station,  to  grant  the 
same  privilege  upon  similar  conditions  to  other  private  per- 
sons in  that  neighborhood,  authorized  a  taking  of  private 
property  for  private  use  in  violation  of  the  Fourteenth 
Amendment.! 

§  352.  Any  proceeding  dependent  upon  taxes  for  private 
purposes  invalid. 

The  cases  cited  in  which  the  Supreme  Court  passed 
upon  the  want  of  public  purpose  in  taxation  were  suits 
upon  municipal  bonds  which  were  held  to  involve  the 
exercise  of  the  power  of  taxation,  and  because  the  pur- 
pose of  the  tax  was  illegal,  the  bonds  dependent  thereon 
were  also  invalid.  This  principle  has  been  extended 
to  the  case  of  a  contract  made  by  a  village  with  a  manu- 
facturing company,  whereby  the  former  agreed  to  pay  the 
latter  for  the  expense  of  removal  to  the  village,  and  further 
agreed  that,  in  consideration  of  the  removal,  it  would 
establish  and  maintain  a  fire  hydrant  and  furnish  water  for 
fire  protection.  The  village  paid  the  cash  bonus  but  failed 
to  maintain  the  hydrant.  Tlie  mill  was  destroyed  by  fire 
and  suit  was  brought  for  its  value  by  the  owner  against  the 
village,  on  the  ground  that  the  fire  could  have  been  extin- 
guished if  the  hydrant  had  been  maintained.  It  was  held 
by  the  United  States  Circuit  Court  of  Appeals,  Sixth  Cir- 

1  Missouri  Pacific  Railway  Co.  v.  Nebraska,  164  U.  S.  403. 


§  353         PUBLIC  PURPOSE  OF  TAXATION.  429 

cuit,i  that  if  the  municipal  corporation  under  the  doctrine 
of  Loan  Association  v.  Topeka  was  without  power  to  issue 
bonds  for  other  than  a  strictl}'-  public  purpose,  it  was 
equally  without  power  to  accomplish  the  same  result  in- 
directly by  the  execution  of  a  contract,  for  a  judgment 
upon  this  could  be  rendered  against  the  corporation  which 
could  be  satisfied  only  by  taxation.  The  court  said,  at  page 
312  :  "  The  only  difference  which  could  be  suggested  relates 
merely  to  form  and  to  the  differences  between  a  direct  and 
indirect  method  of  incurring  an  obligation  which  does  or 
may  require  a  resort  to  the  power  of  taxation." 

§  353.  Railroad  aid  bonds. 

It  has  been  uniformly  affirmed  by  the  Supreme  Court 
that,  in  the  absence  of  restrictions  in  the  State  constitution, 
subscriptions  for  aid  in  the  building  of  railways,  canals  and 
bridges  constitute  a  public  purpose  for  which  bonds,  to  be 
paid  by  taxation,  can  be  issued.  Thus  that  tribunal  said, 2 
referring  to  a  railroad:  "Though  the  corporation  was 
private,  its  work  was  public,  as  much  so  as  if  it  were  to  be 
constructed  by  the  State.  Private  property  can  be  taken  for 
a  public  purpose  onljs  and  not  for  private  gain  or  benefit. 
Upon  no  other  ground  than  that  the  purpose  is  public  can 
the  exercise  of  the  power  of  eminent  domain  in  behalf  of 
such  corporations  be  supported.  *  *  *  Unless  prohib- 
ited from  doing  so,  the  municipal  corporation  has  the  same 
power  to  aid  in  their  construction  as  to  procure  water  for 
its  water  works,  coal  for  its  gas  works,  or  gravel  for  its 
streets  from  beyond  its  territorial  limits.  "^ 

1  Southerland-Innes  Co.  v.  Village  of  Evart,  30  C.  C.  A.  305. 

2  Township  of  Pine  Grove  v.  Talcott,  19  Wall.  6(16, 1.  c.  676;  Sharpless 
V.  Mayor,  21  Pa.  St.  147.  In  Whiting  i7.  Fondulac  Railroad,  25  Wis.  167, 
it  w  IS  held  that  a  tax  for  making  a  donation  to  a  railroad,  in  which  the 
county  did  not  become  a  stockholder,  was  void. 

3  See  also  Meyer  v.  Muscatine,  1  Wall.  381,  and  see  dissenting  opinion 
of  Mr.  Justice  Miller,  who  consistently  denied  this  doctrine. 


430  PUBLIC  PURPOSE  OF  TAXATION.  §  354 

§  354.  Purpose  of  taxation  must  not  only  be  public,  but 
pertain  to  district  taxed. 

The  requirement  of  a  public  purpose  obviously  applies 
to  all  forms  of  taxation,  whether  levied  by  the  State  or 
any  of  the  subdivisions  of  the  State  to  v^hich  the  power 
of  taxation  may  be  delegated,  and  whether  the  tax  is 
general  in  the  State  or  municipality,  or  special,  that  is, 
levied  by  way  of  special  assessment  in  limited  taxing 
districts  created  for  public  improvements.  Whatever  the 
form  of  the  tax,  it  is  inherent  in  its  nature  that  it  must  be 
levied  for  a  public,  as  distinct  from  a  private,  purpose; 
and  it  also  must  be  pubhc  in  the  sense  that  the  purpose 
must  pertain  to  the  district  taxed,'  that  is,  the  tax  levied 
upon  the  entire  State  must  be  for  a  general  public  purpose 
as  distinguished  from  a  distinctively  local  or  municipal 
purpose.  On  the  other  hand,  a  tax  cannot,  or  rather 
should  not,  be  levied  upon  a  particular  district  of  a  State 
alone  for  a  general  public  purpose  not  peculiar  to  the 
district  taxed.i  This  line  of  distinction  however  is  not 
sharply  defined,  but  there  is  obviously  a  very  large  field 
of  leo-islative  discretion  in  determining  what  are  the  public 
purposes  which  warrant  general  taxation  on  the  one  hand, 
and,  on  the  other,  those  which  justify  the  legislature  in 
imposino-  taxation  upon  the  municipal  subdivisions  of  the 
State.  As  the  Supreme  Court  has  repeatedly  declared, 
this  is  one  of  the  questions  which  cannot  be  adjusted  with 
precise  accuracy,  and  it  is  primarily  addressed  to  the 
legislative  discretion. 

Judge  Dillon  remarks  in  1  Dillon  on  Municipal  Corporations,  4th  Ed., 
note,  section  509:  "  If  it  be  allowable  to  judge  of  a  legal  principle  by  its 
fruits,  the  dissenting  and  minority  of  judges  on  this  question  will  find 
much  to  confirm  the  convictiun  that  their  views  were  sound.  But  it  is 
useless  to  fight  that  battle  over  again;  it  has  been  fought  and  lost.  All 
that  is  left  is  the  contemplation  and  contrast  of  what  might  have  been 
and  what  is." 

1  Sanborn  v.  Rice  Co.,  9  Minn.  273. 


§   354  PUBLIC  PURPOSE  OF  TAXATION.  431 

This  principle  is  applicable  in  the  creation  of  local  tax- 
ing districts  £pr  public  improvements,  which  will  be  con- 
sidered in  the  succeeding  chapter.  Questions  relating  tb 
the  public  purpose  of  taxation  can  seldom  be  raised  in 
regard  to  general  levies  for  State  purposes,  as  such  taxes 
are  assessed  and  collected  under  general  laws,  wherein  the 
specific  objects  for  which  taxes  are  to  be  expended  arc 
not  set  forth,  as  in  the  case  of  taxes  levied  for  s})ecific 
local  purposes;  and  the  courts  cannot  look  behind  the 
declared  purposes  of  a  general  tax  to  ascertain  the  intent 
of  the  legislature  as  to  the  appropriation  of  the  proceeds 
of  the  tax. 


CHAPTER     XIII. 

DUE  PROCESS  OF  LAW  IN  SPECIAL  ASSESSMENTS   FOR  LOCAL 
IMPROVEMENTS. 

§  355.  Special  assessments  made  under  taxing  power. 

356.  Peculiar  difficulties  in  special  assessments. 

357.  Fifth  and  Fourteenth  Amendments  in  relation  to  special  assess- 

ments. 

358.  General  power  of  State  in  local  assessments. 

359.  Power  of  State  to  impose  taxation  upon  municipalities. 

360.  Power  of  State  limited  by  its  jurisdiction. 

361.  Assessments  for  drainage. 

362.  Assessments  for  irrigation. 

363.  Pablic  improvements  in  municipalities. 

364.  Difficulty  of  determining  special  benefits. 

365.  Apportionment  of  cost  of  municipal  public  improvements. 

366.  Special  benefits  under  State  constitutions. 
3G7.  Legislative  discretion  in  apportionment. 

368.  Consideration  of  special  benefits  excluded  by  legislative  appor- 

tionment. 

369.  Legislative  power  not  unlimited. 

370.  Supreme  Court  on  assessments  for  municipal  improvements. 

371.  Supreme  Court  on  assessments  for  sewers. 

372.  Supremo  Court  on  assessments  for  streets  and  sidewallis. 

373.  Benefit  districts  for  street  improvements. 

374.  Special  assessments  for  public  parks. 

375.  If  assessment  is  set  aside,  reassessment  may  be  made. 

376.  Notice  and  opportunity  for  hearing. 

377.  Notice  and  hearing  under  legislative  apportionment. 

378.  Hearing  not  required  before  including  property  in  benefited  dis- 

trict. 

379.  Notice  to  parties  liable   to  be  assessed  in  street  openings  not  re- 

quired. 

380.  Express  finding  of  benefits  not  required. 
331.  Euforcement  of  special  assessments. 
382.  Conclusiveness  of  State  determination. 
333.  Supreme  Court  in  Norwool  v.  Baker. 

384.  Norwoods.  Baker  in  State  courts  and  U.  S.  Circuit  Courts. 

385.  N  )rwood  v.  B  iker  limitel  to  its  "  special  facts." 

386.  Municipal  bonds  piyable  from  assessments  held  valid  notwith- 

standing invalidity  of  assessment. 
(432) 


§  355  SPECIAL  ASSESSMENTS.  433 

§  387.  Supreme  Court  in  King  v.  Portland. 

388.  Legislative  power  and  special  facts. 

389.  Accidental  or  exceptional  circumstances. 

390.  Requirements  of  "  due  process  of  law." 

§  355.  Special  assessments  made  under  taxing  power. 

Special  assessments  for  local  improvements  are  made  un- 
der the  sovereign  power  of  taxation,!  yet  they  are  clearly 
distinguished  from  regular  tax  levies  made  under  State  au- 
thority for  general  public  purposes.  Taxes  proper,  or 
general  taxes,  it  was  said  by  the  Supreme  Court,^  proceed 
upon  the  theory  that  the  cost  of  government  is  a  neces- 
sity ;  that  it  cannot  continue  without  means  to  pay  its  ex- 
penses; that  for  those  means  it  has  the  right  to  compel  all 
citizens  and  property  within  its  limits  to  contribute ;  and 
that  for  such  contribution  it  renders  no  special  benefit, 
but  only  secures  to  the  citizen  that  general  benefit,  which 
results  from  the  protection  of  his  person  and  property  and 

1  It  was  contended  at  one  time  that  such  assessments  could  only  be 
made  in  the  exercise  of  the  right  of  eminent  domain.  For  an  interest- 
ing discussion  of  this  point,  see  People  ex  rel.  Griffin  v.  Brooklyn,  4  N.  Y. 
419,  which  is  a  leading  case  on  the  doctrine  that  such  assessments  are 
an  exercise  of  the  power  of  taxation,  and  which  distinguishes  the  power 
of  taxation  from  the  power  of  eminent  domain.  See  also  Newby  v. 
Platte  Co.,  25  Mo.  1.  c.  269.  In  certain  cases  such  assessments  have 
been  sustained  as  an  exercise  of  the  police  power  of  the  State,  as  in  the 
case  of  drains  and  sewers,  Paulsen  v.  Portland,  149  U.  S.  30;  Mor- 
rison V.  Moray,  146  Mo.  543,  where  the  creation  of  levee  districts  was 
sustained  on  that  ground.  Special  assessments  for  sidewalks  have  also 
been  sustained  as  au  exercise  of  the  police  power.  Palmer  v.  Wav,  6 
Colo.  lOG;  State  v.  Newark,  8  Vroom  (N.  J.), 415;  Washington  v.  Nash- 
ville, 1  Swan  (Teun.),  177.  See  also  McBe  in  v.  Chandler,  9  Heisk.  340. 
A  distinction  was  thus  made  in  some  cases  between  sewers  and  side- 
walks and  other  improvements.  But  it  was  said  by  Redfleld,  J.,  in  Allen 
V.  Drew,  44  Vt.  174,  that  it  is  not  easy  to  see  any  distinction  between  an 
assessment  for  the  building  of  a  sewer  or  sidewalk  and  an  aqueduct, 
and  that  each  in  degree  is  a  general  benefit  to  the  public  and  a  special 
beneflt  to  the  local  property  both  in  the  uses  and  the  enhanced  value  of 
the  property. 

2  Illinois  Central  R.  R  Co.  v.  Decatur,  147  U.  S.  190,  1.  c.  197. 

28 


4B4  SPECIAL  ASSESSMENTS.  §  355 

the  promotion  of  those  various  schemes  which  have  for 
their  object  the  welfare  of  all.  On  the  other  hand,  special 
assessments  or  special  taxes  are  justified  by  the  princi- 
ple that  when  a  local  improvement  enhances  the  value  of 
neighboring  property,  that  property  should  pay  the  ex- 
pense. Special  assessments  are  made  upon  the  assumption 
that  a  portion  of  the  community  will  be  specially  and 
peculiarly  benefited  by  the  enhancement  of  the  value  of 
property  peculiarly  situated  as  regards  the  contemplated  ex- 
penditure of  public  funds ;  and,  in  addition  to  the  general 
levy,  special  contributions  in  consideration  of  the  special 
benefit  are  required  from  the  party  specially  benefited. 

It  was  said  in  an  early  case  in  Missouri :  i  "  These  special 
assessments  are  found  in  the  English  law  and  have  pre- 
vailed, it  is  believed,  in  most,  if  not  all,  of  our  American 
States,  and  their  validity,  when  assessed,  as  in  this  in- 
stance (for  a  sewer  tax),  cannot  be  questioned  under  our 
constitution.  Their  intrinsic  justice  strikes  every  one.  If 
an  improvement  is  to  be  made  the  benefit  of  which  is 
local,  it  is  but  just  that  the  property  benefited  should 
bear  the  burden.  While  the  few  ought  not  to  be 
taxed  for  the  benefit  of  the  whole,  the  whole  ous^ht  not  to 
be  taxed  for  the  benefit  of  the  few.  A  single  township  in 
a  county  ought  not  to  bear  the  whole  county  expenses, 
neither  ought  the  whole  county  be  taxed  for  the  benefit  of 
a  single  township.  And  the  same  principle  requires  that 
taxation  for  a  local  object,  beneficial  only  to  a  portion  of 
a  town  or  city,  should  be  upon  that  part  only.  General 
taxation  for  a  mere  local  purpose  is  unjust.  It  burdens 
those  who  are  not  benefited  and  benefits  those  who  are 
exempt  from  the  burden." 

Special  assessments  are  clearly  distinguished  from  gen- 
eral  taxes.     Thus    contracts  of  exemption  from  taxation 

1  Lockwood  V.  St.  Louis,  24  Mo.  22. 


§   356  SPECIAL  ASSESSMENTS.  435 

have  been  held  not  to  exempt  the  property  from  assessments 
for  public  improvements,!  and  it  is  a  question  in  the  con- 
struction of  private  contracts,  like  leases,  whether  the  term 
taxation  therein  includes  special  assessments. ^ 

§  356.  Peculiar  difficulties  in  special  assessments. 

The  exercise  of  the  taxing  power  of  the  State  to  pay 
the  cost  of  a  puplic  improvement  by  assessment  upon  the 
property  specially  benefited  involves  peculiar  difficul- 
ties which  do  not  attend  the  levy  of  general  taxes.  For 
the  latter,  there  is  no  need  to  create  a  special  taxing  dis- 
trict and  define  its  boundaries,  nor  is  there  any  question  as 
to  the  determination  of  what  property  is  specially 
benefited  by  the  expenditure  of  the  taxes  when  col- 
lected. All  this  is  regulated  by  general  law.  Neither 
is  there  any  question,  as  '  a  rule,  as  to  the  notice  and 
opportunity  to  the  taxpayer  for  hearing  in  relation  to 
the  assessment.  Property  is  assessed  for  general  taxation 
under  general  law,  and  the  taxpayer  is  bound  to  take 
notice  of  the  time  and  place  fixed  for  hearing  by  the 
board  of  review  or  equalization  to  which  he  may  ajjpeal  for 
correction  of  his  assessment.  Furthermore  general  taxes 
are  assessed  and  collected  at  regularly  recurring  intervals 
fixed  by  law;  and  the  proceeds  of  general  taxes,  when  col- 
lected hy  the  State   or  political    subdivision   acting   under 

1  Stipra,  §  96. 

2  It  was  said  in  a  recent  opinion  by  the  Supreme  Court  of  Missouri, 
sustaining  a  special  assessment  for  the  establishment  of  a  public  park, 
Kansas  City  v.  Bacon,  157  Mo.  450,  1.  c.  463:  «'  There  are  two  kinds  of 
taxation,  both  emanating  from  the  taxing  power  of  the  government,  but 
each  resting  on  a  different  principle,  the  one  aimed  to  raise  a  revenue  for 
general  governmental  purposes,  the  other  to  raise  a  fund  to  be  devoted 
to  a  particular  purpose.  The  one  for  its  justification  leaves  out  of  view 
the  question  of  individual  benefit,  merging  the  individual  in  the  commun- 
ity, the  other  for  its  justification  advances  the  theory  that  the  indi- 
vidual is  benefited  by  the  improvement  contemplated,  and  because  of 
his  benefit  he  must  contribute  to  the  cost." 


436  SPECIAL  ASSESSMENTS.  §  357 

State  autlioritj,  for  prescribed  public  purposes,  are  dis- 
posed of  by  the  legislative  authority  within  the  limits  of  its 
power.  Comparatively  seldom  therefore  have  questions 
arisen  concerning  due  process  of  law  in  relation  to  general 
taxation,  and  these  have  usually  been  in  relation  to  special 
methods  of  assessment  applied  to  certain  classes  of  prop- 
erty, as  in  the  valuation  of  railroads  or  other  interstate 
properties. 

But  special  assessments  for  local  improvements  from 
their  very  nature  involve  peculiar  and  difficult  questions, 
which  have  occasioned  much  ligitation  and  much  diverse 
judicial  opinion.  Thus  what  are  the  limits,  if  any,  of 
the  power  of  the  State  to  determine  that  any  public  improve- 
ment shall  be  paid  for  by  local  taxation,  rather  than  out  of  the 
jDublic  revenues,  to  determine  the  boundaries  of  the  taxing 
district  whereon  the  cost  of  that  improvement  shall  be 
levied,  and  to  determine  the  method  of  apportionment  upon 
the  property  in  the  district,  whether  by  ascertainment  of 
values  through  quasi  judicial  bearing,  or  by  some  definite 
rule,  as  by  area  or  by  frontage?  When  must  notice  and 
opportunity  for  hearing  be  afforded  to  the  taxpayer  to  con- 
stitute due  process  of  law? 

§  357.  Fiftli  and  Fourteentli  Amendments  in  relation  to 
special  assessments. 

The  subject  of  due  process  of  law  in  connection  with 
special  assessments  for  local  improvements  has  been  con- 
sidered by  the  Supreme  Court  of  the  United  States  in 
numerous  cases,  in  relation  to  both  the  Fifth  and  the  Four- 
teenth Amendments  to  the  Constitution.  The  provision  of 
the  Fifth  Amendment  that  no  person  shall  be  deprived  of 
life,  liberty,  or  property  without  due  process  of  law,  as 
heretofore  shown,  is  only  a  restraint  upon  the  power  of  Con- 
gress and  notupon  the  power  of  the  States;  while  the  Four- 
teenth Amendment  imposes  the   same  prohibition  directly 


§   358  SPECIAL  ASSESSMENTS.  437 

upon  the  States.  In  cases  from  the  States,  the  Supreme 
Court  has  considered  the  question  with  relation  to  the  Four- 
teenth Amendment,  while  in  cases  from  the  city  of  Wash- 
ington or  elsewhere  in  the  District  of  Columbia  where  Con- 
gress  exercises  exclusive  jurisdiction,  both  political  and 
municipal,  it  has  applied  the  Fifth.  In  a  recent  case^  the 
court  said:  "  While  the  lano^uao-e  of  those  amendments  is 
the  same,  yet  as  they  were  engrafted  upon  the  Constitution 
at  different  times  and  in  widely  different  circumstances  of 
our  national  life,  it  may  be  that  questions  may  arise  in  which 
different  constructions  and  applications  of  their  provisions 
may  be  proper." 

The  court  however  further  stated  in  this  case  that  it 
proceeded  therein  upon  the  assumption  that  the  legal  import 
of  the  phrase  due  process  of  law  is  the  same  in  both  amend- 
ments and  added,  1.  c.  page  329:  "  Certainly  it  cannot  be 
supposed  that,  by  the  Fourteenth  Amendment,  it  was  in- 
tended to  impose  on  the  States,  when  exercising  their 
powers  of  taxation,  any  more  rigid  or  stricter  curb  than 
that  imposed  on  the  Federal  government  in  a  similar  exer- 
cise of  power  by  the  Fifth  Amendment."  In  none  of  the 
cases  has  the  Supreme  Court  made  any  distinction  between 
the  two  amendments  as  to  the  two  requirements  of  "  due 
process  of  law  "  in  special  assessments. 

§  358.  General  power  of  State  In  local  assessments. 

Although  special  assessments  are  usually  made  for  pub- 
lic improvements  in  municipalities  and  form  one  of  the 
most  perplexing  problems  in  municipal  government,  their 
use  is  not  limited  to  municipalities.  Public  improvements, 
which  may  be  of  special  benefit  to  property  in  a  certain 
locality,  may  be  required  in  any  part  of  the  State,  and  the 
application  be  thus  warranted  of  the  principle  on  which 

1  French  v.  Barber  Asphalt  Paving  Co.,  181  U.  S.  324, 1.  c.  328. 


438  SPECIAL  ASSESSMENTS.  §  358 

special  assessments  rest,  that  the  property  benefited  by 
the  improvement  should  pay  the  cost.  The  State  there- 
fore has  the  general  power  not  only  to  determine  that 
public  improvements  shall  be  made,  whenever  it  deems 
them  essential  to  the  health  and  prosperity  of  the  com- 
munitv,  but  also  to  determine  to  what  extent  the  cost  of 
such  public  improvements  shall  be  paid  by  the  public  at 
large  and  what  part  shall  be  paid  bv  the  property  specially 
benefited  thereby.  It  follows  that  the  State  has  the  power, 
subject  to  the  restraints  of  its  own  constitution,  to  estab- 
lish local  taxing  districts  in  an}^  part  of  its  territory  and  to 
impose  upon  such  districts  the  cost  of  a  public  improve- 
ment. Upon  the  same  principle  it  may  impose  the  expense 
of  a  public  improvement  upon  a  municipality,  which  is 
speciall}'^  benefited  thereby,  although  benefit  from  the  im- 
provement may  also  inure  to  the  people  of  the  State  at 
large.  Thus  it  was  said  by  the  Supreme  Court, i  in  refer- 
ence to  the  act  of  the  State  of  Alabama,  which  imposed 
upon  the  city  of  Mobile  the  expense  of  a  harbor  improve- 
ment in  Mobile  Ba}^ :  — 

' '  When  any  public  work  is  authorized  it  rests  with  the 
legislature,  unless  restrained  by  constitutional  provisions, 
to  determine  in  what  manner  the  means  to  defray  its  cost 
shall  be  raised.  It  may  apportion  the  burden  ratably 
among  all  the  counties  or  other  particular  subdivisions  of 
the  State,  or  lay  the  greater  share  or  the  whole  upon  that 
county  or  portion  of  the  State  specially  and  immediately 
benefited  by  the  expenditure. 

"  It  may  be  that  the  act  in  imposing  upon  the  county  of 
Mobile  the  entire  burden  of  improving  the  river,  bay,  and 
harbor  of  Mobile  is  harsh  and  oppressive,  and  that  it  would 
have  been  more  just  to  the  people  of  the  county  if  the  legisla- 
ture had   apportioned  the    expenses    of  the  improvement, 

1  Mobile  V.  Kimball,  102  U.  S.  691, 1.  c.  703. 


r   359  SPECIAL  ASSESSxMENTS.  439 

which  Tvas  to  benefit  the  whole  State,  among  all  its  coun- 
ties But  this  court  is  not  the  harbor  in  which  the  people 
of  a  citv  or  county  can  find  a  refuge  from  ill-advised, 
unequaf  and  oppressive  State  legislation.  The  judicial 
power  of  the  Federal  government  can  only  be  invoked 
when  some  right  under  the  Constitution,  laws,  or  treaties 
of  the  United  States  is  invaded.  In  all  other  cases,  the 
only  remedy  for  the  evils  complained  of  rests  with  the 
people,  and  must  be  obtained  through  a  change  of  their 
representatives.  They  must  select  agents  who  will  correct 
the  injurious  legislation,  so  far  as  that  is  practicable,  and 
be  more  mindful  than  their  predecessors  of  the  pubhc  in- 
terests." 1 

§  359.  Power  of  State   to   impose  taxation  upon  munici- 
palities. 

The  power  of  the  State  to  create  taxing  districts  is 
closely  allied  with  its  sovereign  power  over  its  political 
subdivisions  and  municipalities,  the  limits  of  which  it  is 
obviously  very  difficult  to  determine.  The  question  of  the 
State's  power  over  its  municipalities  was  presented 
in  another  form    to    the    Supreme   Court,    in  a  case  in- 

1  It  was  said  by  the  Supreme  Court  of  Missouri  in  State  v.  Lefflng- 
well  54  Mo.  458,  1.  c.  473,  holding  void  an  act  making  a  park  district 
out  of  part  of  a  city,  that  nothing  is  better  settled  than  that  special  taxa- 
tion for  objects  that  are  general  and  public  is  illegal.  *  *  ihe 
legislature  has  no  power  to  take  the  money  of  one  man  and  transfer  it  to 
an'other,  nor  can  it  select  a  particular  township  and  say  that  it  shall  pay 
all  the  taxes  of  the  county,  nor  designate  a  certain  county  and  declare 
it  shall  assume  all  the  burdens  of  the  State."  The  act  was  held  void  on 
the  ground  that  the  property  in  the  district  was  not  any  more  bene- 
fited by  the  park  than  the  property  in  the  city  at  large,  and  the  case  was 
decided  irrespective  of  the  provision  of  the  State  consti^tution  as  to 
organizing  public  corporations.  In  Dyar  v.  Farmington  Village.  70  Me. 
515,  an  act  authorizing  a  town  to  levy  a  general  tax  upon  part  of  the 
real  estate  included  withih  its  limits  was  held  void,  the  court  saying 
that  one   public  district  could  not   be  created  within  another  nor  be 


440  SPECIAL  ASSESSMENTS.  §    359 

volving  the  validity  of  a  statute  annexing  to  a  city  what 
was  claimed  to  be  rural  territory,  and  imposing  upon  the 
latter 's  inhabitants  arbitrarily  the  burden  of  taxation  for  cit}'^ 
purposes,  in  return  for  which  it  was  claimed  thej'- derived  no 
benefit.!  Xhe  court  held  that  what  portion  of  the  State 
should  be  within  the  limits  of  a  city  and  be  governed  bv 
its  authorities  and  its  laws  has  always  been  considered  to 
be  a  proper  subject  of  legislation.  How  thickly  or  how 
sparsely  the  territory  within  a  city  should  be  settled  is  one 
of  the  matters  within  the  legislative  discretion.  Whether 
territory  shall  be  governed  for  local  purposes  by  a  county, 
a  city,  or  a  township  organization  is  one  of  the  most  usual 
and  ordinary  subjects  of  State  legislation,  and  the  court 
refused  to  interfere  with  the  exercise  of  the  legislative 
discretion  on  this  subject. 

This  principle  of  the  State's  control  over  its  municipali- 
ties was  reaffirmed  by  the  court  in  sustaining  the  legislation 
of  Connecticut,  whereby  a  bridge  district  was  made  of  five 
municipalities,  upon  which  was  apportioned  the  cost  of  the 

allowed  to  overlap  another,  so  that  for  the  same  public  purpose  or  any 
other  public  purpose  one  portion  of  the  real  estate  is  taxed  twice  while 
the  remainder  is  taxed  only  once. 

1  Kelly  I).  Pittshurah,  104  U  S.  78,  svpra,  §  318.  See  also  Forpythe  ». 
Hammoud,  08  Fed.  Kep.  774.  It  has  been  held  iu  Missouri  that  the  leg- 
islature cannot,  coustitutionally  authorize  a  municipal  corporation  to  tax 
for  its  owu  purposes  linds  lyin?  beyond  its  limits,  Wells  ».  Weston,  22 
Mo.  384,  It  would  seem,  under  the  same  principle,  that  the  le^i-lature 
could  not  impose  upon  a  municipality  a  tax  for  pur«.-ly  State  purposes 
having  no  relation  to  the  municipality.  Jud^e  Dillon  says  in  Municipal 
Corporations,  4th  Ed.,  §  73,  as  to  the  distinction  between  th?  public 
and  proprietary  rights  of  a  municipality,  after  reviewing  the  author- 
ities, that  there  are  difficulties  attending  the  usually  unlimited  power 
over  municipal  corporations,  and  difficulties  also  in  assigning  limits 
to  that  power.  He  concludes:  <'Outhe  whole  the  question  whether 
a  city  may  be  compelled  to  create  a  debt  or  liability  against  its  will 
must  be  answered,  we  think,  with  reference  not  only  to  the  const! - 
tu'ional  provisions  of  the  State,  but  to  the  nature  of  the  purposes  for 
which  the  debt  or  liability  is  to  be  incurred." 


§   359  SPECIAL  ASSESSMENTS.  441 

purchase  and  maintenance  of  a  free  bridge  in  the  pro- 
portion of  benefits  received  by  each,  as  determined  by 
judicial  proceedings.!  Tlie  regulation  of  municipal  cor- 
porations is  a  matter  iDcculiarly  within  the  domain  of 
State  control,  and  a  municipal  corporation,  so  far 
as  its  purely  municipal  relations  are  concerned,  is 
simply  an  agency  of  the  State  for  conducting  the  affairs 
of  the  government,  and  as  such  subject  to  the  control  of 
the  legislature.  These  are  matters  of  a  purely  local 
nature,  in  respect  to  which  the  Federal  Constitution  does 
not  limit  the  power  of  the  State.  It  was  also  said  that 
the  legislature,  speaking  generally,  may  create  a  new  tax- 
ing district,  if  the  State's  constitution  does  not  prevent, 
and  determine  what  territory  shall  belong  to  such  district 
and  what  property  shall  be  considered  as  benefited  by  the 
jDroposed  improvement. 

The  power  of  the  State  to  impose  upon  municipalities 
or  local  taxing  districts  the  cost  of  public  improvements 
is  primarily  a  legislative  power.  As  this  power  in  the  dis- 
tribution of  public  burdens  is  of  the  very  essence  of 
sovereignty,  it  is  very  difficult  to  declare  its  limitations, 
and  especially  is  this  true  when  the  Federal  Supreme  Court 
is  called  upon  to  review  the  judgment  of  the  State  courts 
upon  the  validity  of  State  legislation.  Nevertheless  it  is 
clear  that  the  fundamental  canons  of  taxation,  that  the 
purpose  must  be  public  and  that  the  public  purpose 
must  directly  appertain  to  the  district  taxed,  apply  to 
special  assessments  as  fully  as  to  general  taxation.  The 
legislative  power  is  not  absolute  and  unlimited  in  the  one 
case  any  more  than  in  the  other.  The  legislative  discre- 
tion therefore  in  apportioning  the  cost  of  public  improve- 
ments, while  broad  and  comprehensive,  is  not  unlimited, 

1  Williams  t?.  Eggleston,  170  U.  S.  304,  affirming  State  v.  Williams,  68 
Conn.  131.  As  to  the  power  of  the  State  over  rauaicipalities,  see  also 
New  Orleans  v.  New  Orleans  Water  Co.,  142  U.  S.  79. 


442  SPECIAL  ASSESSMENTS.  §  360 

but  is  subject  to  judicial  review  and  scrutiny  in  determining 
wlietlier  property  cliarged  with  such  cost  is  taxed  in  accord 
with  the  fundamental  canons  of  taxation  and  thus  under 
"  due  process  of  law.  " 

§  360.  Power  of  State  limited  by   its  jurisdiction. 

The  State  must  exercise  this  power  within  the  limits  of 
its  jurisdiction  and  cannot  therefore,  in  assessing  the  cost  of 
a  public  improvement  upon  the  property  in  a  certain  dis- 
trict, authorize  the  recovery  of  a  personal  judgment 
against  a  non-resident,  without  service  of  process.  Thus 
the  statute  of  Iowa  authorized  a  personal  judgment  in  a 
suit  upon  a  special  tax  bill  for  a  local  assessment.  It  was 
held  by  the  Supreme  Court  i  that  such  a  judgment  rendered 
without  personal  service  against  a  non-resident,  so  far  as 
the  personal  liability  is  concerned,  would  amount  to  the 
taking  of  property  without  due  process  of  law ;  and  that 
such  a  judgment  is  good  onlj^  so  far  as  it  affects  the  prop- 
erty which  is  taken  or  brought  under  the  jurisdiction  of 
the  court  or  other  tribunal  in  an  ordinary  action  to  enforce 
the  personal  liability.  No  jurisdiction  is  thereby  acquired 
over  the  person  of  a  non-resident,  further  than  respects 
the  property  so  taken,  and  this  is  as  true  of  an  assessment 
against  a  non-resident  as  of  a  more  formal  judgment.  In 
this  case  the  landowner  never  voluntarily  appeared  in  the 
litigation. 

But  it  seems  that  the  authorization  of  a  personal  judg- 
ment on  a  special  assessment,  to  be  recovered  upon  per- 
sonal service,  is  within  the  power  of  a  State  and  presents 
no  Federal  question. 2  As  to  this  point  the  court  said,  1.  c. 
page  106 :  — 

"  It  is  urged  with  force,  —  and  some  highly  respectable 

1  Dewey  v.  Des  Moines,  173  U,  S.  19o. 

2  Davidson  v.  New  Orleans,  96  U.  S.  97. 


§    301  SPECIAL  ASSESSMENTS.  443 

authorities  are  cited  to  support  the  proposition,  —  that 
while  for  such  improvements  as  this  a  part,  or  even  the 
whole,  of  a  man's  property  connected  with  the  improve- 
ment may  be  taken,  no  personal  liability  can  be  imposed  on 
him  in  regard  to  it.  If  this  were  a  proposition  coming  be- 
fore us  sitting  in  a  State  court,  or,  perhaps,  in  a  Circuit 
Court  of  the  United  States, l  we  might  be  called  upon  to  de- 
cide it  ;  but  we  are  unable  to  see  that  any  of  the  provisions  of 
the  Federal  Constitution  authorizes  us  to  reverse  the  judg- 
ment of  a  State  court  on  that  question.  It  is  not  one  which  is 
involved  in  the  phrase  '  due  process  of  law,'  and  none 
other  is  called  to  our  attention  in  the  present  case." 

§  361.  Assessments  for  drainage. 

The  extent  of  the  State's  power  to  create  special  taxing 
districts  for  public  improvements  is  illustrated  in  the  drain- 
age or  swamp  land  cases,  wherein  the  laws  of  Louisiana, 
New  Jersey  and  California,  providing  for  the  drainage  of 
swamp  lands  by  the  levy  of  local  assessments,  were  all 
sustained  by  the  Supreme  Court. ^ 

In  the  first  of  these  cases  it  was  claimed  that  the  prop- 

1  This  was  a  writ  of  error  to  the  Supreme  Court  of  Louisiana.  Though 
it  may  be  within  the  power  of  the  State  to  create  and  enforce  a  personal 
liability  in  such  cases,  it  is  difficult  to  see  how  it  can  be  defended.  Spe- 
cial assessments  rest  upon  the  theory  that  the  property  is  benefited  suffi- 
ciently to  pay  the  tax,  and  it  seems  inconsistent  therewith  that  there 
should  be  any  liability  beyond  the  value  of  the  benefited  property.  See 
Taylor  v.  Palmer,  31  Cal.  240,  where  the  decision  seems  to  have  turned 
upon  the  construction  of  the  State  constitution.  In  Neenan  v.  Smith,  50 
Mo.  525,  the  court  based  its  decision  denying  the  right  to  a  personal 
judgment  on  its  construction  of  the  statute,  but  said  that  it  greatly 
doubted  whether  a  legislature  has  the  power  to  authorize  a  general 
charge  upon  the  owner  of  local  property  that  may  be  assessed  for  its 
special  benefit,  unless  the  owners  of  all  taxable  property  within  the  mu- 
nicipality are  equally  charged. 

2  Davidson  v.  New  Orleans,  96  U.  S.  97;  Hagar  v.  Reclamation  Dis- 
trict, 111  U.  S.  701 ;  Wurts  v.  Hoagland,  lU  U.  S.  GOG. 


444  SPECIAL  ASSESSMENTS.  §   361 

erty  of  the  plaintiff  was  not  benefited  by  the  improvement. 
The  court  said  that  this  was  a  matter  of  detail  on  which  it 
could  not  interfere,  if  it  was  clearly  true;  but  that  it  was 
hard  to  fix  a  limit  within  the  two  parishes  which  constituted 
the  taxing  district,  where  the  property  would  not  be  bene- 
fited by  the  removal  of  the  swamps  and  marshes  situated 
in  those  parishes. 

In  the  second  case  in  California,  a  system  was  formed  for 
reclaiming  swamp  and  overflowed  lands  and  fitting  them 
for  cultivation  through  reclamation  districts,  established  by 
the  supervisors  of  a  county  upon  petition  of  one-half  or 
more  of  the  holders  of  the  lands.  Commissioners  were 
appointed  to  view  the  land  and  assess  upon  each  acre  to  be 
reclaimed  a  tax,  which  should  be  its  proportion  of  the 
whole  expense.  The  Supreme  Court  sustained  the  judg- 
ment of  the  Circuit  Court  enforcing  the  collection  of  these 
taxes,  saying,  page  704:  — 

"  It  is  not  open  to  doubt  that  it  is  in  the  power  of  the 
State  to  require  local  improvements  to  be  made  which  are 
essential  to  the  health  and  prosperity  of  any  community 
within  its  borders.  To  this  end  it  may  provide  for  the 
construction  of  canals  for  draining  marshy  and  malarious 
districts,  and  of  levees  to  prevent  inundations,  as  well  as 
for  the  opening  of  streets  in  cities  and  of  roads  in  the 
country. 

"  It  may  possibly  be  that  in  some  portions  of  the  coun- 
try there  are  overflowed  lands  of  so  large  an  extent  that 
the  expense  of  their  reclamation  should  properly  be  borne 
by  the  State.  But  this  is  a  matter  purely  of  legislative 
discretion.  Whenever  a  local  improvement  is  authorized, 
it  is  for  the  legislature  to  prescribe  the  way  in  which  the 
means  to  meet  its  cost  shall  be  raised,  whether  by  general 
taxation,  or  by  laying  the  burden  upon  the  district  specially 
benefited  by  the  expenditure.  County  of  Mobile  v.  Kim- 
ball,   102    U.    S.  691,    704.     The   rule    of    equality   and 


§    362  SPECIAL  ASSESSMENTS.  445 

uniformity,  prescribed  in  cases  of  taxation  for  State  and 
county  purposes,  does  not  require  that  all  property,  or  all 
persons  in  a  county  or  district,  shall  be  taxed  for  local 
purposes.  Such  an  application  of  the  rule  would  often 
produce  the  very  inequality  it  was  designed  to  prevent.  As 
we  said  in  Louisiana  v.  Pilsbury,  105  U.  S.  278,  295, 
there  would  often  be  manifest  injustice  in  subjecting  the 
whole  property  of  a  city,  and  the  same  may  be  said  of  the 
whole  property  of  any  district,  to  taxation  for  an  improve- 
ment of  a  local  character.  The  rule,  that  he  who  reaps 
the  benefit  should  bear  the  burden,  must  in  such  cases  be 
applied . ' ' 

In  the  third  case  the  New  Jersey  act  provided  for  a  system 
of  drainage  of  all  wet  or  marshy  lands,  upon  proceedings 
instituted  by  at  least  five  owners  of  separate  lots  of  laud  in 
the  tract  and  not  objected  to  by  the  owners  of  a  greater 
part  thereof.  The  commissioners  appointed  by  the  Su- 
preme Court  of  the  State,  after  notice  and  hearing,  made  an 
assessment  of  the  cost  of  the  drainage  upon  ail  of  the  own- 
ers in  the  district.  The  Supreme  Court  after  remarking 
that  such  drainage  assessments  had  been  sustained  by  the 
courts  of  New  Jersey,  held  that,  as  the  statute  was  appli- 
cable to  all  lands  of  the  same  kind  and  no  person  could  be 
assessed  under  it  for  the  expense  of  the  drainage  without 
notice  and  opportunity  to  be  heard,  there  was  no  depriva- 
tion of  property  without  due  process  of  law. 

§  362.  Assessments  for  irrigation. 

A  very  important  extension  of  this  principle  was  made 
by  the  court  in  sustaining  the  Irrigation  Acts  of  California  i 
of  1887  and  as  amended  by  the  act  of  1891.  This  statute 
provided  for  the  formation  of  irrigation  districts  upon  the 
petition  of  fifty  or  a  majority  of  the  owners  of  land  suscep- 

1  Fallbrook  Irrigation  District  v.  Bradley,  1G4  U.  S.  112. 


446  SPECIAL  ASSESSMENTS.  §  362 

tible  of  one  mode  of  irrigation  from  a  common  source  and 
by  the  same  system  of  work.     On  hearing,  as  to  whether 
petitioners  were  of  this  class,  whether  they  had  complied  with 
the  statutory  requirements  and  whether  their  hinds  would 
be  benefited  by  the  proposed  improvement,  the  board  of  su- 
pervisors might  modify  the  boundaries  of  the  district  so  as 
to  include  other  lands  susceptible  of  the  same  improvement, 
that  is,  by  irrigation  from  the  same  source,  and  to  exclude 
lands  which  would  not  be  thus  improved.    On  approval  by  a 
two-thirds  vote  at  an  election  in  the  district  held  under  the 
direction  of  the  Board  of  Supervisors,  the  irrigation  dis- 
trict should  be  organized  as  a  public  corporation  with  fixed 
boundaries  and  the  cost  of   the   irrigation  works    assessed 
ad  valorem  upon  all  the  lands  within  the  corporate  limits. 
In  a  suit  brought  in  the  United  States  Circuit  Court  by  an 
alien  property  owner  in  the  district,  the    enforcement  of 
this  statute  by  giving  a  deed  of  plaintiff's  land  sold  for  the 
non-payment  of  the  assesment  was  enjoined  on  the  ground 
that  the  statute  was  void  as  taking  property  without  due 
process  of  law.i      It  was  strongly  urged  on  appeal  that 
this  act  was  distinguished  from  the  drainage  cases,  in   that 
there  only  the  land  drained  was  assessed  for  the  improve- 
ment, but  that  in  this  case  a  man's  land  could  be  included, 
even  if  he  did  not  want  the  water,  did   not   need  it  and 
would  "not  "be  benefited  by  it.     It  was  also  claimed  that  it 
was  a  delegation  of  the  power  of  taxation  to  irresponsible 
petitioners  and  to  a  majority  of  the  electors  of  the    dis-. 
trict.2 

1  For  opinion  in  tlie  Circuit  Court,  see  68  Fed.  Rep.  948.  This  act  had 
been  sustained  by  tiie  Supreme  Court  of  California,  Modesto  Irrigation 
District  v.  Tragea,  88  Cal.  334.  See  also  In  re  Madera  Irrigation  District, 
14  L,  R.  A.  755,  92  Cal.  296.  For  an  opinion  of  the  Sup.  Court  of  Ne- 
braska holding  the  Irrigation  Act  of  that  State  valid  under  State  and 
Federal  Constitutions,  see  Board  of  Directors  v.  Collins,  46  Neb.  411. 

2  See  argument  of  Mr.  Joseph  H.  Clioate  in  this  6ase,  pp.  131  to  151. 
He  said  at  page  142 :  "  Patronage,  plunder  and  bonds  without  limit  are  the 


§   362  SPECIAL  ASSESSMENTS.  447 

The  Supreme  Court,  reversing  the  Circuit  Court,  held^ 
that  the  act  was  valid  and  enforceable.  The  irrigation  of 
really  arid  lands  is  a  public  use,  and  the  question  whether 
any  particular  land  will  be  benefited  is  one  of  fact,  for 
the  determination  of  which  the  act  made  sufficient  provi- 
sion. 

The  court  said,  1.  c.  166,  that  the  question  to  what  extent 
the  land  required  irrigation  was  primarily  legislative,  though 
"  subject  to  the  scrutiny  and  judgment  of  the  courts  to  the 

obvious  tendency  and  result,  if  not  the  direct  object,  of  the  act.  Towns 
and  villages,  however  solidly  built,  may  be  included,  and  practically  are 
included  in  the  districts  proposed.  *  *  *  w^  submit,  with  all  confi- 
dence, that  this  novel  mode  of  constituting  districts  for  assessment  is  an 
unlawful  delegation  of  legislative  power,  and  is  in  its  very  nature  one  of 
those  exercises  of  the  powers  of  government,  unrestrained  by  the  estab- 
lished principles  of  private  rights  and  of  distributive  justice,  which  this 
court  has  declared  to  be  the  thing  which  constitutes  the  taking  of  a  man's 
property  without  due  process  of  law."  In  this  case,^  Mr.  Maxwell  ap- 
peared with  Mr.  Choate,  while  against  them  were  ex-President  Harri- 
son, ex- Judge  John  F.  Dillon,  Mr.  William  B.  Guthrie,  and  Mr.  Clarence 
A.  Seward. 

1  Chief  Justice  Fuller  and  Justice  Field  dissented.  The  magnitude  of 
the  interest  involved  in  this  litigation  may  be  realized  from  the  following 
portion  of  the  statement,  p.  152:  — 

"  What  is  termed  the  '  arid '  belt  is  said  in  the  Census  Bulletin,  No.  23, 
for  the  census  of  1890,  to  extend  from  Colorado  to  the  Pacific  Ocean,  and 
to  include  over  600,000,000  acres  of  land.  Of  this  enormous  total,  arti- 
ficial irrigation  has  thus  far  been  used  only  upon  about  three  and  a  half 
million  acres,  of  which  slightly  over  a  million  acres  lie  in  the  State  of 
California.  It  was  stated  by  counsel  that  something  over  thirty  irriga- 
tion districts  had  been  organized  in  California  under  the  act  in  question, 
and  that  a  total  bonded  indebtedness  of  more  than  $16,000,000  had  been 
authorized  by  the  various  districts  under  the  provisions  of  the  act,  and 
that  more  than  $8,030,000  of  the  bonds  had  been  sold  and  the  money  used 
for  the  acquisition  of  property  and  water  rights  and  for  the  construction 
of  works  necessary  for  the  irrigation  of  the  lands  contained  in  the  vari- 
ous districts." 

The  Act  of  Congress  of  June  17,  1902,  appropriates  the  receipts  fnm 
the  sale  and  disposal  of  public  lands  in  certain  western  States  and  Ter- 
ritories, to  be  set  aside  as  a  "  reclamation  fund"  for  the  construction  of 
irrigation  works  to  reclaim  arid  lands,  in  the  area  between  Kansas,  Ne- 
braska and  the  Dakotas  and  the  Pacific  Ocean. 


448  SPECIAL  ASSESSMENTS.  §   362 

extent  that  it  must  appear  that  the  use  intended  is  a  public 
use  as  that  expression  has  been  defined  rehitivelv  to  this 
kind  of  legislation."  The  act  sufficiently  limited  the  land 
which  could  be  included  in  a  district.  It  must  be  susceptible 
of  irrigation  from  a  common  source,  and  by  the  same  sys- 
tem of  works,  and  it  must  be  of  such  a  character  that  it 
would  be  benefited  by  irrigation  by  the  system  to  be 
adopted.  This  meant  that  the  benefit  must  be  substantial 
and  the  question  whether  any  particular  land  would  be 
substantially  benefited  was  necessarily  one  of  fact,  upon 
which  the  court  could  not  review  the  decision  of  the  State 
court. 

In  answer  to  the  claim  that  apportionment  of  the  expense 
upon  an  ad  valorem  basis  was  wholly  arbitrary  and  without 
any  regard  to  the  actual  benefits  received,  some  lands  being, 
without  irrigation,  wholly  arid,  and  some  needing  very  little 
irrigation,  if  any  at  all,  the  court  said,  pp.  176-7:  — 

"Although there  is  a  marked  distinction  between  an  assess- 
ment for  a  local  improvement  and  the  levy  of  a  general  tax, 
yet  the  former  is  still  the  exercise  of  the  same  power  as  the 
latter,  both  having  their  source  in  the  sovereign  power  of 
taxation.  Whatever  objections  may  be  urged  to  this  kind 
of  an  assessment,  as  being  in  violation  of  the  State  consti- 
tution, yet  as  the  State  court  has  held  them  to  be  without 
force,  we  follow  its  judgment  in  that  case,  and  our  attention 
must  be  directed  to  the  question  whether  any  violation  of  the 
Federal  Constitution  is  shown  in  such  an  assessment.  *  *  * 
Assume  that  the  only  theory  of  these  assessments  for 
local  improvements  upon  which  they  can  stand  is  that  they 
are  imposed  on  account  of  the  benefits  received,  and  that  no 
land  ought  in  justice  to  be  assessed  for  a  greater  sum  than  the 
benefits  received  by  it,  yet  it  is  plain  that  the  fact  of  the 
amount  of  benefits  is  not  susceptible  of  that  accurate  de- 
termination which  appertains  to  a  demonstration  in  geom- 
etry.     Some  means  of  arriving  at  this  amount  mast  be 


§   363  SPECIAL  ASSESSMENTS.  449 

used,  and  the  same  method  may  be  more  or  less  accurate 
in  different  cases  involving  different  facts.  Some  choice  is 
to  be  made,  and  where  the  fact  of  some  benefit  accruing  to 
all  the  lands  has  been  legally  found,  can  it  be  that  the 
adoption  of  an  ad  valorem  method  of  assessing  the  lauds  is 
to  be  held  a  violation  of  the  Federal  Constitution?  It 
seems  to  us  clearly  not.  It  is  one  of  those  matters  of  de- 
tail in  arriving  at  the  proper  and  fair  amount  and  propor- 
tion of  the  tax  that  is  to  be  levied  on  the  land  with  regard 
to  the  benefits  it  has  received,  which  is  open  to  the  discre- 
tion of  the  State  legislature,  and  with  which  this  court 
ought  to  have  nothing  to  do.  The  way  of  arriving  at  the 
amount  may  be  in  some  instances  inequitable  and  unequal, 
but  that  is  far  from  rising  to  the  level  of  a  constitutional 
problem  and  far  from  a  case  of  taking  property  without 
due  process  of  law."  ^ 

§  363.  Public  improvements  in  municipalities. 

The  difiiculty  of  the  questions  growing  out  of  the  essen- 
tial difference  between  special  assessments  and  general 
taxation  is  increased  by  the  circumstances  attending  the  de- 
mand for  public  improvements  in  the  rapidly  growing  cities 
of  the  country.  Costly,  public  improvements,  such  as 
sewers  and  paved  streets,  are,  in  the  nature  of  things,  only 
possible  where  there  are  compact  populations  and  high  real 

1  It  was  held  by  the  New  York  Court  of  Appeals,  In  re  TuthlU,  163 
N.  Y.  133,  49  L.  R.  A.  781,  that  the  provision  of  the  New  York  constitu- 
tion authorizing  the  drainage  of  agricultural  lands  by  necessary  ditches 
and  dykes  upon  the  lands  of  others,  under  proper  restrictions  and  mak- 
ing just  compensation,  did  not  authorize  the  assessment  of  the  expense 
of  constructing  a  drain  upon  other  land-owners  deemed  benefited 
thereby,  as  the  constitution  contemplated  that  the  expense  should  be 
borne  by  the  petitioners.  But  it  was  said  that,  if  the  constitution  did 
authorize  such  an  assessment,  it  would  involve  the  taking  of  property 
without  due  process  of  law,  in  violation  of  the  Federal  Constitution,  as 
it  would  be  levying  a  tax  for  a  private  purpose. 

2? 


450  SPECIAL  ASSESSMENTS.  §   363 

estate  values.  In  the  actual  or  anticipated  growth  of  cities, 
very  often  these  improvements  are  forced  upon  localities 
where  the  property  is  not  of  sufficient  value  to  pay  for 
them,  and  the  enforcement  of  special  assessments  involves 
practical  confiscation. 

The  expansion  of  city  populations  over  large  areas  through 
the  application  of  electricity  to  rapid  transit  has  increased 
these  difficulties,  as  the  diffusion  of  population,  while  pro- 
moting the  health  and  comfort  of  the  people,  sometimes 
diminishes  rental  values  in  other  sections  and  makes  special 
assessments  for  street  improvements  a  greater  burden  upon 
property.  This  same  cause  has  enormously  enhanced  the 
expense  of  municipal  government,  and  has  rendered  more 
difficult  of  determination  the  proportion  of  expense  of 
public  improvements,  which  should  be  paid  by  the  prop- 
erty-owners of  the  community  at  large.  What  might  be 
fair  and  just  in  a  compact  community  in  a  comparatively 
small  space,  may  be  very  unfair  and  unjust  in  a  sparsely 
populated  area.  There  the  same  social  and  economic  con- 
ditions which  have  increased  the  expense  of  municipal 
administration  and  which  require  that  public  improvements, 
if  they  are  made  at  all,  must  be  paid  for  by  means  of  special 
assessments,  make  the  property  less  able  to  carry  the  burden 
of  such  assessments. 

Public  improvements  in  municipalities  are  usually  under 
the  control  of  the  municipal  authorities,  to  whom  the  au- 
thority is  delegated  by  the  State  to  make  such  improve- 
ments at  the  cost  of  the  property  in  the  special  taxing  dis- 
trict created  by  the  municipality  therefor.  Very  often 
such  improvements  are  made  upon  the  demand  of  those  who 
are  not  compelled  to  pay  for  them,  and  the  discontent  thus 
caused  is  not  infrequently  aggravated  by  a  want  of  confi- 
dence in  the  municipal  authorities.  ,  With  the  best  possible 
municipal  administration  it  requires  careful  consideration  to 
determine  what  and  when  public  improvements  are  required. 


§   364  SPECIAL  ASSESSMENTS. 


451 


and  when  property  in  a  district  is  sufficiently  benefited  to 
justify  the  assessment  of  the  necessary  cost.  It  is  inevitable 
therefore  that  under  existing  conditions  the  imposition  of 
special  assessments  should  encounter  the  most  vio-orous  re- 
sistence. 

§  364.  Difficulty  of  determining  special  benefits. 

While  the  principle  involved  in  the  establishment  of  a 
taxing  district  in  a  city  is  the  same  as  in  the  case  of  a  drain- 
age or  irrigation  district  in  the  country,  the  application 
often  raises  different  and  difficult  questions.  Thus  while 
in  the  case  of  a  sewer  the  territory  drained  may  be  a  natural 
benefited  district,  what  rule  can  determine  with  any  degree 
of  accuracy  what  part  of  the  benefits  from  a  street  im- 
provement inures  to  the  property  fronting  the  street,  what 
part  to  the  property  on  intersecting  streets,  and  what  part 
to  the  general  public  using  the  street?  It  not  infrequently 
happens  that  the  cost  of  a  paved  street  is  wholly  out  of 
proportion  to  the  value  of  the  abutting  property,  and  the 
improvement  is  demanded  solely  for  the  convenience  of  the 
public.  Thus  in  the  case  of  a  park  which  is  open  to  the 
general  public,  what  rule  can  determine  the  limits  of  the 
district  upon  which  the  cost  of  opening  the  park  shall  be 
charged?  It  is  obvious  that  the  determination  of  the  pro- 
portional benefits  enjoyed  by  contiguous  property  on  the 
one  hand  and  by  the  general  public  on  the  other,  or  the 
apportionment  of  the  benefit  as  between  the  property  owners 
in  the  district,  cannot  be  determined  with  precision  and  can 
at  best  be  but  approximate. 

It  is  agreed  that  the  only  basis  for  the  apportionment  is  the 
presumption  of  special  benefit  to  the  property  to  the  extent 
of  the  tax  assessed.  As  the  exercise  of  the  taxing  power  is 
legislative  and  not  judicial,  the  determination  of  the 
necessity  for  the  improvement  and  the  basis  of  the  ap- 
portionment  is  primarily  legislative.       The    most   serious 


452  SPECIAL  ASSESSMENTS.  §  365 

legal  difficulty,  and  the  one  upon  which  the  courts  have 
most  widely  differed,  is  as  to  the  conclusiveness  of  the  legis- 
lative determination  in  fixing  the  basis  of  apportionment, 
when  this  basis  excludes  the  investigation  of  special  benefits 
as  to  the  individual  property  holders. 

§  365.  Apportionment  of   cost   of    municipal  public  im- 
provements.^ 

Different  methods  have  been  adopted  for  apportioning 
the  cost  of  public  improvements  in  municipalities.  Thus 
when  the  taxing  district  is  created,  the»  proportion  of  ben- 
efits may  be  determined  by  a  commission  or  other  quasi 
judicial  authority,  or,  as  is  more  usual,  a  definite  basis  of 
apportionment  may  be  established  by  tte  charter  or  ordi- 
nance of  the  municipality,  according  to  the  assessed  value 
of  the  property  in  the  district,  or  according  to  the  front- 
age upon  the  street  or  other  improvement,  or  upon  the 
area  within  a  designated  district.  Such  legislative  basis  of 
apportionment,  whether  by  assessed  value  or  frontage  or 
area  is  made  upon  the  presumption  that  the  special  benefits 
are  equally  distributed  through  the  district  and  are  fairly 
apportioned  on  such  basis. 

Sometimes  this  apportionment  by  frontage  or  area  is 
made  the  fixed  rule  of  the  city  charter  or  statute,  so 
that  no  discretion  is  left  to  the  municipal  authorities  ex- 
cept in  determining  when  the  improvement  shall  be  made, 
that  is,  when  the  conclusion  is  warranted  that  the  special 
benefits  to  the  property  within  the  district  will  equal  that 
part  of  the  cost  of  the  improvement  to  be  taxed  ao:ainst 
such  property.  This  method  of  fixing  the  basis  of  appor- 
tionment has  the  advantage  of  leaving  as  little  as  possible 
to  the  discretion  of  the  municipal  authorities.  It  also  in- 
volves the  disadvantage  that  the  improvement,  if  made  at 

1  See  Walston  v.  Nevin,  128  U.  S.  578,  infra,  §  373. 


§   366  SPECIAL  ASSESSMENTS.  453 

all,  must  be  made  upon  the  basis  prescribed  by  the  char- 
ter, and  there  can  be  no  modification  to  meet  special  and 
exceptional  circumstances  which  may  make  the  application 
of  this  basis  inequitable  in  individual  cai^es.  Although  the 
special  benefit  is  the  only  admissible  warrant  for  the  assess- 
ment, the  consideration  of  the  question  is  liable,  under 
this  system,  to  be  obscured  b}^  the  general  public  conven- 
ience demanding  the  improvement. 

Sometimes  a  fixed  proportion  of  the  cost  of  the  work  is 
required  to  be  paid  from  the  general  fund  of  the  cit}^  and 
only  a  part  levied  upon  the  property  specially  benefited ;  while 
in  other  cases  the  entire  cost  is  assessed  as  special  benefits 
upon  property  within  the  district.  In  sewer  construction 
both  the  area  and  frontage  rules  have  been  applied. 
In  street  improvement  the  frontage  rule  is  generally  used, 
sometimes  in  connection  with  the  area  rule  so  as  to  include 
property  upon  intersecting  streets,  presumably  benefited 
by  the  improvement. 

§  366.   Special  assessments  under  State  constitutions. 

It  is  not  within  the  scope  of  this  work  to  consider  the 
questions  arising  in  the  different  States,  as  to  the  construc- 
tion of  their  own  constitutions  upon  the  power  of  the  leo-- 
islature  to  make  assessments  for  local  improvements.  It  is 
sufficient  to  state  that  the  rule  has  been  settled  in  nearly  all 
the  States,  that  special  assessments  for  public  improve- 
ments upon  property  specially  benefited  do  not  violate  the 
constitutional  requirement  of  uniformity  and  equality  in 
taxation,  or  that  property  shall  be  assessed  according 
to  its  value.  Such  provisions  have  been  held  to  have  no 
application  to  assessments  btised  upon  special  benefits. ^ 

In  several    States   the  earlier   decisions  to  the  contrary 

1  See  2  Dillon's  Municipal  Coi^orations,  Sec.  762,  where  the  State 
authorities  are  reviewed. 


454  SPECIAL  ASSESSMENTS.  §  367 

were  subsequently  overruled.^  It  was  said  by  the  Supreme 
Court  2  that  it  fully  agreed  with  the  Supreme  Court  of 
Louisiana  in  its  construction  of  the  constitution  of  that 
State  requiring  equality  and  uniformity  in  taxation,  that  it 
did  not  take  away  the  power  of  making  assessments  for 
local  public  improvements.     The  court  said,  page  295:  — 

"  AYe  are  of  opinion  that  the  construction  given  was 
correct.  It  is  impossible  to  apply  to  the  varying  wants  of  a 
municipality  the  rule  invoked  with  reference  to  taxation 
for  State  purposes  on  propert}"  throughout  the  State,  with- 
out producing  the  very  inequality  which  that  rule  was  de- 
signed to  prevent.  There  would  often  be  manifest  injus- 
tice in  subjecting  the  whole  property  of  a  city  to  taxation 
for  an  improvement  of  a  local  character.  The  rule  that  he 
who  reaps  the  benefit  should  bear  the  burden  must  in  such 
cases  be  applied." 

The  court  added  that  the  same  construction  of  a  similar 
clause  in  the  constitutions  of  other  States  had  been  adopted 
hy  their  highest  courts. 

§  367.  Legislative  discretion  in  apportionment. 

While  a  few  States  still  insist  that  the  apportionment 
must  be  made  according  to  a  determination  of  special  bene- 
fits in  each  case,^  the  trend  of  authority  has  been  over- 
whelmingly in  support  of  the  rule  that  a  legislative  appor- 
tionment by  frontage  or  area  is  allowed.     Thus  it  was  said 

1  Thus  in  Colorado,  Denver  v.  Knowles,  17  Colo.  204,  overruling  Pal- 
mer V.  Ray,  6  Colo.  106;  in  Maryland,  In  re  Johns  Hopkins  Hospital,  56' 
Md.  1,  overruling  Baltimore  v.  Scharf,  54  Md.  499;  la  Alabama,  Birming- 
ham w.  Klein,  89  Ala.  461,  overruling  Mobile  v.  Dargan,  45  Ala.  310- 
Early  decisions  in  Minnesota  and  in  Illinois  were  in  effect  overruled  by 
changes  in  the  State  constitutions. 

2  Louisiana  v.  Pilsbury,  105  U.  S.  278. 

3  Peay  v.  Little  Rock,  32  Ark.  31.  The  frontage  rule  Y?as  denied  in 
McBean  v.  Chandler,  9  Heisk.  (Tenu.)  349,  as  unequal  and  not  uniform. 


§   368  SPECIAL  ASSESSMENTS.  455 

by  Judge  Cooley  in  the  Supreme  Court  of  Michigan  in  1 88 1 :  * 
"  We  might  fill  pages  with  the  names  of  cases  decided  in 
other  States  which  have  sustained  assessments  for  improv- 
ing streets,  though  the  apportionment  of  the  cost  was 
made  on  the  same  basis  (according  to  frontage)  as  the  one 
before  us.  If  anything  can  be  regarded  as  settled  in 
municipal  law  in  this  country,  the  power  of  the  legislature 
to  permit  such  assessments  and  direct  an  apportionment  of 
the  cost  by  frontage,  should  by  this  time  be  considered  as 
no  longer  open  to  controversy.  Writers  on  constitutional 
law,  on  municipal  law,  and  on  the  law  of  taxation  have 
collected  the  cases  and  have  recognized  the  principle  as 
settled,  and  if  the  question  were  new  in  this  State,  we 
might  think  it  important  to  refer  to  what  they  say.  But 
the  question  was  not  new;  it  was  settled  for  us  thirty  years 
ago." 

Judge  Dillon  said  in  1891,  after  reviewing  the  State 
cases :  ^ — 

"  The  courts  are  very  generally  agreed  that  the  authority 
to  require  the  property  specially  benefited  to  bear  the  ex- 
pense of  local  improvements  is  a  branch  of  the  taxing 
power,  or  included  within  it.  *  *  *  Whether  the  ex- 
pense  of  making  such  improvements  shall  be  paid  out  of 
the  general  treasury,  or  be  assessed  upon  the  abutting 
property  or  other  property  specially  benefited,  and,  if  in 
the  latter  mode,  the  assessment  shall  be  upon  all  property 
found  to  be  benefited,  or  alone  upon  the  abutters,  according 
to  frontage  or  according  to  the  area  of  their  lots,  is  ac- 
cording to  the  present  weight  of  authority  considered  to 
be  a  question  of  legislative  expediency." 

§  368.  Consideration  of  special  benefits  excluded  by  leg- 
islative apportionment. 

The  apportionment  of  the  cost  of  a  public  improvement 

1  Sheley  v   Detroit,  45  Mich.  431,  1.  c.  page  433. 

2  Dillon's  Municipal  Corporations,  4th  Ed.,  Vol.  2,  §  762. 


456  SPECIAL  ASSESSMENTS.  §   368 

by  a  definite  rule,  as  by  frontage  or  area  in  the  taxing 
district,  has  been  held  necessarily  to  exclude  evidence  of 
the  want  of  special  benefits  in  the  enforcement  of  assess- 
ments upon  the  property,  as  the  legislative  determination 
in  ordering  the  assessment  upon  that  basis  presumptively 
involves  the  finding  that  the  property  is  benefited  to  the 
extent  of  the  assessment. 

This  conclusiveness  of  the  legislative  decision  in  the  for- 
mation of  taxing  districts  is  said  therefore  to  rest  upon  the 
presumption  that  the  legislature  proceeds  upon  investigation 
and  inquiry,  and  decides  what  the  public  good  requires; 
that  it  only  creates  a  taxing  district  and  charges  the  expense 
of  a  public  improvement  upon  it  when  satisfied  that  the  prop- 
erty therein  will  be  specially  benefited  by  the  improvement. i 
The  courts  in  sustaining  this  doctrine  of  legislative  conclu- 
siveness, recognize  that  its  real  basis  is  the  impracticability 
of  making  any  satisfactory  judicial  apportionment  of  the 
benefits  from  such  improvements  as  between  the  abutting 
property  and  tlie  general  public.  In  the  language  of  the 
Supreme  Court  of  North  Dakota:  ^  "How  could  the  courts 
ever  determine  what  part  should  be  paid  out  of  the  general 
treasury  and  what  part  raised  by  local  assessment?  What 
rule  would  govern  them  in  investigating  such  a  question? 
And  what  right  have  they  to  dictate  where  the  line  shall  be 
drawn?  "  ^ 

1  Spencer  v.  Merchant,  125  U.  S.  345,  affirming  100  N.  Y.  587. 

2  Ralph  V.  Fargo,  7  N.  Dak.  640,  1.  c.  p.  050. 

3  The  diffiialty  of  drawing  thti  line  between  the  general  benefit  to  the 
public  and  the  special  benefit  to  the  property  owner  is  illustrated  not 
only  in  street  improvement  cases  butiu  such  matters  as  street  sprinlillng. 
Thus  it  was  held  in  Minnesota,  State  v.  R^-is,  38  Minn.  371,  that  st7'eet 
sprinkling  is  a  public  improvement  for  which  a  special  assessment  can  be 
made;  while  in  City  of  Chicago??.  Blair,  149  IM.  310,  and  24  L.  R.  A.  412, 
and  in  New  Yorli  Life  Ins.  Co.  v,  Prest,  71  Fed.  Rep.  815,  it  was  held  that 
it  is  not  a  local  improvement  and  that  the  conclusion  of  the  local  author- 
ities that  it  is,  is  reviewable  by  the  courts.  See  also  Sears  v,  Boston, 
173  Mass.  71,  and  43  L.  R.  A.  834.     Street  sweeping  was  held  a  proper 


§   369  SPECIAL  ASSESSMENTS.  457 

§  369.  Legislative  power  not  unlimited. 

Notwithstanding  this  general  acceptance  of  the  doctrine 
that  the  apportionment  of  the  cost  according  to  a  definite 
rule  of  presumed  benefits  is  a  matter  of  legislative  discre- 
tion, excluding  thereafter  the  judicial  consideration  of 
.special  benefits,  it  does  not  follow  that  the  legislative 
authority  in  that  regard  is  unhmited.  On  the  contrary, 
this  exclusion  of  the  consideration  of  special  benefits  can 
only  be  justified  on  the  theory  that  it  had  been  determined 
by  the  municipal  authorities  upon  investigation  that  the 
special  benefits  to  each  lot  charged  were  equal  to  the 
assessment.  Evidence  of  the  want  of  special  benefits  is 
excluded  only  on  the  theory  that  the  fact  sought  to  be 
disproved  has  been  conclusively  determined  in  the  proceed- 
ings in  which  the  assessment  was  made.  Thus  it  was  said 
by  the  Supreme  Court  of  Massachusetts  :  ^  — 

charge  for  local  assessments  in  Reinken  v.  Fuefaring,  13G  lad.  382,  and  15 
L.  R.  A.  624.  The  cleaning  of  ice  and  snow  from  a  sidewalk  was  held  a 
proper  local  charge  in  New  York,  Carthage  u.  Frederick,  122  N.  Y.  268, 
and  10  L.  R.  A.  178;  and  in  Massachusetts,  In  re  Goddard,  16  Pickering- 
504;  but  denied  in  Illinois,  Gridley  f.  Blooraington,  88  111.  554;  Chicago 
V.  O'Brien,  11 1111.  532.  The  Supreme  Court  of  Pennsylvania  in  Hamraett  v. 
Philadelphia,  65  Pa.  146,  held  that  the  power  to  assess  was  exhausted 
with  a  single  exercise  for  the  same  improvement,  and  maintenance  and 
reconstruction  must  be  a  public  expense.  This  was  a  street  paving  case 
and  was  reaffirmed  in  City  of  Erie  v.  Russell,  148  Pa.  381,  in  the  case  of 
a  sewer.  But  in  Missouri,  McCjrmack  v.  Patchia,  53  Mo.  33,  and  Farrar 
V.  St.  Louis,  80  Mo.  379,  the  power  was  held  to  be  a  continuing  power, 
unless  expressly  restrained  by  the  constitution  or  by  the  charter  of  the 
city. 

1  Sears  v.  Boston,  173  Mass.  71,  p.  78.  The  court  in  this  case  held 
valid  an  assessment  for  watering  streets  in  proportion  to  the  lineal 
feet  as  applied  to  occupied  estates  in  the  central  portion  of  the  city. 
It  said  that  it  made  this  decision  with  some  hesitation,  as  watering 
produces  only  a  temporary  effect,  but  concluded  that  the  habitual  water- 
ing was  a  benefit  to  the  property.  But  it  was  held  in  another  case, 
Sears  v.  Street  Commissioners,  173  Mass.  350,  that  a  sewer  assessment 
which  included,  in  addition  to  the  cost  of  the  sewer,  part  of  the  general 
expenses  of  the  department,  was  invalid.  See  also  2  Dillon  on  Municipal 
Corporations,  4  Ed.,  §  761. 


458  SPECIAL  ASSESSMENTS.  §  370 

*'  While  these  assessments  must  be  founded  upon  benefits, 
the  courts  have  generally  recognized  the  difficulty,  and  in 
many  cases  the  impracticability,  of  attemptmg  to  estimate 
benefits  to  estates  one  by  one  without  some  rule  or  princi- 
ple of  general  application  which  will  make  the  assessments 
reasonable  and  proportional,  according  to  benefits. 
Accordingly,  the  determination  of  such  a  rule  or  principle 
bv  the  legislature  itself,  or  by  the  tribunal  appointed  b}' 
the  legislature  to  make  the  assessments,  has  commonh' 
been  upheld  by  the  courts.  If,  however,  its  effect  plainly 
is  to  make  an  assessment  upon  any  estate  substantially  in 
excess  of  the  benefit  received,  it  is  set  aside." 

Other  courts,  sustaining  legislative  apportionment  of  spe- 
cial assessments,  have  been  less  decided  in  asserting  this 
limitation  of  legislative  authority;  and  the  fundamental 
principle,  that  such  assessments  can  only  be  justified  in  any 
case  by  the  benefits  received,  has  been  obscured  by  the 
practical  convenience  of  the  legislative  apportionment  by 
frontage  or  area  throughout  the  taxing  district.  "Where 
the  conditions  of  the  parcels  of  land  assessed  are  substan- 
tially uniform,  as  in  average  city  lots,  such  apportionment 
b}'  frontage  or  area  works  approximate  equality.  The  recog- 
nition of  this  fact  and  the  realization  of  the  impracticability 
of -judicially  determining  the  special  benefits  led  to  the 
o-eneral  adoption  and  enforcement  of  the  rule  that  the 
leirislative  apportionment  is  conclusive,  until  the  essential 
limitations  of  legislative  authority  were  reasserted  by  the 
decision  of  the  Supreme  Court  in  Norwood  v.  Baker  in 
1898.1 

§  370.   Supreme  Court  on  assessments  for  municipal  im- 
provements. 

.   The  Supreme  Court  can  only  consider  this  subject  in  re- 
lation to  due  process  of  law  as  guaranteed  by~  the  Four- 

1  Infra,  §  383. 


§   370  SPECIAL  ASSESSMENTS.  -  459 

teenth  Amendment.  Only  on  this  ground  can  it  overturn 
the  system  established  by  the  State  authorities  and  approved 
by  the  State  courts.  It  cannot  review  the  decisions  of  the 
State  courts  with  reference  to  the  construction  of  their  own 
statutes  and  constitutions,  and  thus  it  has  had  no  concern  with 
the  many  questions  which  have  arisen  in  that  connection. 
Furthermore  in  questions  so  intimately  related  to  the  sov- 
ereignty of  the  State  as  the  exercise  of  the  State  power  in 
establishing  taxing  districts  and  apportioning  the  burden  of 
taxation  for  the  cost  of  public  improvements,  it  would 
necessarily  require  a  clear  case  of  violation  of  right 
under  the  Federal  Constitution,  before  the  Supreme  Court 
would  interfere  with  the  exercise  of  legislative  discretion 
under  the  State  laws  as  approved  by  the  State  courts.  The 
Supreme  Court  has  considered  this  question  not  only  in 
cases  from  the  State  courts,  where  the  protection  of  the 
Fourteenth  Amendment  was  invoked,^  but  also  in  cases  from 
the  District  of  Columbia  where  the  same  claim  was  made 
in  reference  to  the  Fifth  Amendment  ^  restraining  the  power 
of  Congress ;  and  it  will  be  convenient  therefore  to  consider 
the  decisions  of  the  court  in  relation  to  the  different  classes  of 


1  Hagar  w.  Reclamation  District,  supra,  §  319;  Irrigation  District  v. 
Bradley,  supra,  §  362;  Wurts  v.  Hoagland,  supra,  §  361;  Davidson  v.  New 
Orleans,  96  U.  S.  97;  County  of  Mobile  v.  Kimball,  102  U.  S.  691;  Spencer 
V.  Merchant,  125  U.  S.  345;  Kerr  v.  South  Park  Commissioners,  117  U.  S. 
379 ;  Walston  v.  Nevia,  128  U.  S.  578 ;  Lent  v.  Tillson,  140  U.  S.  316 ;  Paulsen 
V.Portland,  149  U.  S.  30;  Corryu.  Campbell,  154  U.  S.  629;  Norwood  v.  Ba- 
ker, 172 U.  S.  269;  Bellingham Bay, etc.,  Co.  v.  NewWhatcom,  172U.  S.  314; 
Loebu.  Columbia  Township  Trustees,  179  U.  S.  472;  French  v.  Barber  As- 
phalt Co.,  181  U.  S.  324  (and  following  cases)  ;  Farrellu. West  Chicago  Park 
Commissioners,  181  U.  S.  404;  Lombard  w.  Park  Commissioners,  181  U. 
S.38;  Carson  v.  Brockton  Sewerage  Co.,  182  U.  S.  398;  King  v.  Portland, 
184  U.  S.  61;  Voigt  v.  Detroit,  184  U.  S.  115;  Goodrich  u.  Detroit 
181  U.  S.  432. 

2  Welland  v.  Presbury,  14  Wallace  676;  Mattingly  u.  District  of  Co- 
lumbia, 97  U.  S.  687,  Shoemaker  u.  United  States,  147  U.  S.  282;  Bau- 
man  v.  Ross,  167  U.  8.  548;  Parsons  v.  District  of  Columbia,  170  U.  S. 
45;  Wight  y.  Davidson,  181  U.  S.  371. 


460  SPECIAL  ASSESSMENTS.  §    371 

public  improvements.  It  will  be  observed  however  that 
in  cases  from  the  District  of  Columbia,  the  court  exercised 
a  broader  jurisdiction  in  determining  the  validity  of  the  ac- 
tion of  Congress  in  its  powers  over  the  District,  than  it 
assumed  in  reviewing  the  decisions  of  the  Supreme  Courts 
of  the  States.  In  the  latter  cases  it  was  limited  to  the 
constitutional  question,  in  the  former  it  was  not. 

§  371.   Supreme  Court  on  assessments  for  sevv^ers. 

In  the  matter  of  sewers  there  is  a  natural  benefited  dis- 
trict, to  wit,  the  territory  drained,  and  as  to  such  cases  the 
courts  have  had  little  diificulty  in  accepting  the  conclusive- 
ness of  the  legislative  determination  regarding  the  property 
benefited.!  j^  Paulsen  v.  Portland,  the  court  held  that  in  ^ 
making  a  taxing  district  out  of  the  area  drained  by  a  sewer, 
no  notice  to  or  assent  by  the  taxpayer  was  necessary.  The 
sewer  in  question  was  constructed  in  the  exercise  of  the 
police  power  for  the  health  and  cleanliness  of  the  city,  and 
the  police  power  is  exercised  solely  at  the  legislative  will. 
So  also  it  is  for  the  legislature  to  determine  the  territorial 
district  to  be  taxed  for  the  local  improvement. 

In  a  case  from  Massachusetts  the  court  held  valid  an 
ordinance  making  an  annual  assessment  upon  property 
owners  for-the  use  of  a  common  sewer,  which  had  been 
built  by  assessments  upon  the  property  benefited.^ 

In  a  case  from  the  District  of  Columbia,^  the  court 
sustained  an  assessment,  under  Act  of  Congress,  in  the 
District  of  Columbia,  where  one-third  of  the  cost  of  the 
sewer  was  taxed  upon  the  property  adjoining,  according  to 
frontao-e,  for  the  enlargement  of  the  sewer.  In  this  case 
the  assessment  was  confirmed  by  Act  of  Congress,    which 

1  Gillette  ».  City  of  Denver,  21  Fed.  Rep.  822,  Brewer,  J.;  Paulsen  v. 
Portland,  149  U.  S.  30. 

2  Carson  v.  Brockton  Sewerage  Commission,  182  U.  S.  398. 

3  Mattingly  v.  District  of  Columbia,  97  U.  S.  687. 


§  372  SPECIAL  ASSESSMENTS.  461 

the  court  held  was  equivalent  to  an  authorization,  adding  at 
page  692 : — 

"  It  may  be  that  the  burden  laid  upon  the  property  of  the 
complainants  is  onerous.  Special  assessments  for  sj)ecial 
road  or  street  improvements  very  often  are  oppressive.  But 
that  the  legislative  power  may  authorize  them  and  may 
direct  them  to  be  made  in  proportion  to  the  frontage,  area, 
or  market  value  of  the  adjoining  property  at  its  discretion, 
is,  under  the  decisions,  no  longer  an  open  question." 

§  372.   Supreme    Court   on  assessments  for   streets    and 
sidewalks. 

The  same  principle  has  been  applied  to  the  opening, 
widening,  and  paving  of  streets  and  sidewalks.  Thus  an 
assessment  under  the  statute  of  New  York  makine;  a  tax- 
ing  district  of  the  lands  lying  within  three  hundred  feet  on 
either  side  of  the  street  improved  was  sustained  and  held 
valid  as  to  all  parcels  of  land  which  were  included  within 
that  district,  though  some  of  them  did  not  front  upon  the 
street. 1  The  court  affirmed  the  judgment  of  the  New 
York  Court  of  Appeals,  which  had  said  in  its  opinion: 
"  The  act  of  1881  determines  absolutely  and  conclusively 
the  amount  of  tax  to  be  raised,  and  the  property  to  be  as- 
sessed, and  upon  which  it  is  to  be  apportioned.  Each  of 
these  things  was  within  the  power  of  the  legislature,  whose 
action  cannot  be  reviewed  in  the  courts  upon  the  ground 
that  it  acted  unjustly  or  ^vithout  appropriate  and  adequate 
reason ;  "  and  added  at  page  355  :  — 

"  The  legislature,  in  the  exercise  of  its  power  of  taxation, 
has  the  right  to  direct  the  whole  or  a  part  of  the  expense 
of  a  public  improvement,  such  as  the  laying  out,  grading 
or  repairing  of  a  street,  to  be  assessed  upon  the  owners  of 

1    Spencer  v.  Merchant,   125  U.   S.  345,  and  New  York  Court  of  Ap- 
peals, 100  N.  Y.  587. 


462  SPECIAL  ASSESSMENTS.  §    372 

lands  benefited  thereby;  and  the  determination  of  the 
territorial  district  which  should  be  taxed  for  a  local  im- 
provement is  within  the  province  of  legislative  discre- 
tion. *  *  *  If  the  legislature  provides  for  notice  to  and 
hearing  of  each  proprietor,  at  some  stage  of  the  proceed- 
ings, upon  the  question  what  proportion  of  the  tax  shall 
be  assessed  upon  his  land,  there  is  no  taking  of  his  prop- 
erty without  due  process  of  law.  *     *     * 

"In  the  absence  of  any  more  specific  constitutional  re- 
striction than'  the  general  prohibition  against  taking  prop- 
erty without  due  process  of  law,  the  legislature  of  the 
State,  having  the  power  to  fix  the  sum  necessary  to  be 
levied  for  the  expense  of  a  public  improvement,  and  to 
order  it  to  be  assessed,  either,  like  other  taxes,  upon  prop- 
erty generally,  or  only  upon  the  lauds  benefited  by  the 
improvement,  is  authorized  to  determine  both  the  amount 
of  the  whole  tax,  and  the  class  of  lands  which  will  receive 
the  benefit  and  should  therefore  bear  the  burden,  although 
it  may,  if  it  sees  fit,  commit  the  ascertainment  of  either  or 
both  of  these  facts  to  the  judgment  of  commissioners."  ^ 

The  Act  of  Congress  for  opeuing  streets  in  the  city  of 
Washington  and  providing  for  apportioning  one-half  of  the 
cost  upon  the  lands  found  to  be  benefited  was  sustained  as 
not  violative  of  the  Fifth  Amendment. ^  The  court  said 
that  it  was  for  the  legislature  and  not  for  the  judiciary  to 
determine,  whether  the  expense  of  a  public  improvement 
should  be  borne  by  the  whole  city,  or  by  the  district,  or  by 
the  property  immediately  benefited.  The  rule  of  appor- 
tionment among  the  parcels  of  land  benefited  also  rests 
within  the  discretion  of  the  legislature,  and  may  be  fixed  in 
proportion  to  the  frontage,  area,  or  the  market  value  of 
the  lands,  or  in  proportion  to  the  benefits  as  estimated  by 
the  commissioners.     It  was  within  the  power  of  Congress 

1  Justice  Matthews  and  Justice  Harlan  dissented. 

2  Bauman  v.  Ross,  167  U.  S.  548. 


§   372  SPECIAL  ASSESSMENTS.  463 

to  include  as  benefited  all  lands  lying  within  the  benefited 
district,  and  Congress  might  submit  the  question  of  what 
parcels  of  land  were  benefited  to  the  determination  of  the 
tribunal  intrusted  with  the  authority  of  making  the  assess- 
ment. 

In  a  later  case  from  the  District  of  Columbia, ^  the 
validity  of  an  act  making  an  assessment  at  the  rate  of  $1.25 
per  lineal  foot  upon  property  abutting  on  streets  where 
a  water  main  was  laid  was  sustained  by  the  Supreme 
Court,  which  held  that  the  action  of  Congress  was  con- 
clusive alike  of  the  question  of  the  necessity  of  the 
work  and  of  the  benefit  to  the  abutting  property.  The 
court  said  in  this  case  that  there  was  an  obvious  necessity 
for  a  system  to  supply  the  inhabitants  with  a  constant  and 
unfaihng  supply  of  water,  an  essential  for  health,  comfort 
and  safety  next  in  importance  to  air.  The  citizen  cannot  be 
heard  to  contend  that  he  is  entitled  to  receive  such  advan- 
tages gratuitously,  nor  that  the  laws  and  ordinances  under 
which  they  are  created  and  regulated  are  invalid,  unless  his 
individual  and  personal  views  have  been  formally  obtained 
and  considered.^ 

1  Parsons  v.  District  of  Columbia,  170  U.  S.  45. 

2  In  Provident  Institution  v.  Jersey  City,  113  U.  S.  506,  an  act  passed 
prior  to  the  date  of  plaintiff's  mortgage  made  water  rents  a  charge 
upon  lands  in  Jersey  City,  though  at  the  date  of  the  mortgage  there  were 
no  valid  water  rents  due  on  the  mortgaged  property.  Plaintiff  contended 
that  the  statutes,  by  giving  a  superior  lien  to  water  rents  afterwards  ac- 
crued, deprived  it  of  its  property  without  due  process  of  law,  but  the  court 
held  that,  since  plaintiff  took  the  mortgages  subject  to  the  statute,  it  had 
BO  ground  to  complain.  And  even  if  the  mortgages  had  been  created  be- 
fore its  passage,  the  statute  would  be  valid.  That  which  is  given  for  the 
betterment  of  the  common  pledge  is  in  natural  equity  entitled  to  first 
place  among  the  claims  against  it.  Providing  a  sufficient  water  supply 
for  the  inhabitants  of  a  great  and  growing  city,  is  one  of  the  highest  func- 
tions of  municipal  government,  and  tends  greatly  to  enhance  the  value 
ot  all  real  estate  in  its  limits.  It  might  be  difficult,  the  court  concluded, 
to  show  any  substantial  distinction  between  such  charge  for  water  and  a 
tax,  but  the  case  at  bar  did  not  call  for  an  opinion  on  that  point. 


464  SPECIAL,  ASSESSMENTS.  §   374 

§  373.  Benefit  districts  for  street  improvements. 

A  Kentucky  statute  authorized  the  city  government  of 
Louisville  to  open  and  improve  streets  at  the  exclusive  cost 
of  the  owners  of  lots  in  each  one-fourth  of  a  square,  to  be 
equally  apportioned  by  the  council  according  to  the  num- 
ber of  square  feet  owned  by  them  respectively,  except  that 
corner  lots  of  prescribed  dimensions  paid  twenty-five  per 
cent  more  than  others,  each  subdivision  of  territory  bounded 
on  all  sides  by  principal  streets  being  deemed  a  square. 
This  statute  had  been  sustained  by  the  Kentucky  Court  of 
Appeals,^  and  its  judgment  was  affirmed  on  motion  by 
the  Supreme  Court,  as  the  contention  had  been  pressed 
upon  them  before  and  determined  adversely,  so  that  there 
was  no  necessity  for  its  being  argued. ^ 

§  374.  Special  assessments  for  public  parks. 

It  was  said  by  the  Supreme  Court  in  a  case  from  the 
District  of  Columbia,^  involving  an  assessment  for  a  public 
park  established  under  Act  of  Congress  for  the  District  of 
Columbia,  that  in  the  memory  of  men  now  living  the  prop- 
osition to  take  private  property  without  the  consent  of  its 
owner  for  a  public  park  and  assess  a  proportionate  part  of 
the  cost  upon  the  real  estate  benefited  would  have  been  re- 
garded as  a  novel  exercise  of  the  legislative  power.  But 
the  adjudicated  cases  determine,  not  only  that  the  estab- 
lishment of  a  public  park  is  a  public  use,  but  that  the  judi- 
cial function  is  exhausted  when  this  question  is  decided, 
and  that  the  extent  to  which  such  private  property  shall  be 
taken  for  such  use  rests  wholly  in  the  legislative  discretion.* 

1  Preston  t),  Roberts,  12  Bush  57;  Beck  u.  Obst,  12  Bush268;  Broad- 
•way  Baptist  Church  v.  McAtee,  8  Bush  503. 

2  Walston  V.  Nevin,  128  U.  S.  578.  Another  case  of  summary  dispo- 
sition was  in  Corry  v.  Campbell,  154  U.  S.  629. 

3  Shoemaker  v.  United  States,  147  U.  S.  283. 

*  Kerry.  South  Park  Commissioners,  117  U.  S.  379;    Farrell  v.  West 


§   375  SPECIAL  ASSESSMENTS.  465 

§  375.  If   assessment  is   set  aside,  reassessment  may  be 
made. 

Where  an  improvement  lias  been  ordered  and  the  assess- 
ment made  to  pay  for  it  has  been  adjudged  invalid  or  has 
proven  ineffective  for  any  reason,  an  act  of  the  legislature 
authorizing  a  reassessment  in  the  taxing  district  involves 
no  violation  of  the  rule  requiring  due  process  of  law,^ 
although  the  reassessment  includes  interest  on  the  unpaid 
old  assessments  and  part  of  the  expense  of  levying  them. 

In  a  later  case  involving  the  validity  of  a  reassessment 
by  the  West  Chicago  Park  Commissioners  under  the  laws 
of  Illmois,  it  was  said  to  be  no  longer  open  to  question  that, 
where  a  special  assessment  to  pay  for  a  particular  park  has 
been  held  to  be  illegal,  no  "violation  of  the  Constitution  of 
the  United  States  arises  from  a  subsequent  authority  given  to 
make  a  new  special  assessment  to  pay  for  the  completed 
work.  2 

This  principle,  that  the  invalidity  for  any  reason  of  a 
special  assessment  does  not  release  the  property  from  the 
obligation  to  pay  its  proper  share  of  the  cost  of  the 
improvement  on  the  due  ascertainment  thereof  by  a  reas- 
sessment lawfully  made,  is  illustrated,  in  the  case  of  Nor- 
wood V.  Baker,  infra,  §  383,  where  the  assessment  was  set 
aside  as  wanting  in  due  process  of  law.  The  court  said 
that  the  legal  effect  of  the  injunction  granted  by  it  was  only 
to  prevent  the  enforcement  of  the  particular  assessment  in 
question.  It  left  the  village  in  its  discretion  to  take  such 
steps  as  were  within  its  power,  either  under  existing  statutes 
or  under  any  authoritj^  which  might  thereafter  be  con- 
ferred upon  it,  to  make  a  new  assessment  upon  the  plain- 
Chicago  Park  Commissioners,  181  D.  S.  404;  Lombard  v.  West  Chicago 
Park  Commissioners,  181  U.  S.  38. 

*  Spencer  w.  Merchant,  125  U.  S.  345. 

2  Lombard  v.  West  Chicago  Park  Commissioners,  181  U.  S.  33;  Bell- 
mghara  Bay  Co.  y.  New  Whatcom,  172  U.  S.  314,  afflrmiug  16  Wash.  131. 

30 


466  SPECIAL  ASSESSMENTS.  §  376 

tiff's  abutting  property  for  so  much  of  the  expense  of  open- 
ing the  street,  as  was  found  upon  due  and  proper  inquiry  to 
be  equal  to  the  special  benefits  accruing  to  the  property.^ 

§  376.  Notice  and  opportunity  for  hearing. 

The  general  principle,  that  there  must  be  some  opportu- 
nity for  hearing  at  some  stage  of  the  procedure,  discussed 
in  Chapter  XI  in  relation  to  general  taxation,  applies  with 
special  force  to  local  assessments  and  for  the  reason  there 
explained,  that  assessments  for  special  taxes  are  not  made  at 
stated  periods  as  in  general  taxation,  but  whenever  the 
legislative  discretion  determines  that  the  improvement  shall 
be  made  at  local  expense.  There  is  therefore  a  necessity 
for  notice  and  opportunity  for  hearing,  which  does  not  exist 
in  the  case  of  general  taxation. 

Wherever  the  cost  of  a  public  improvement  is  appor- 
tioned according  to  the  judgment  of  commissioners  or  other 
tribunal  as  to  the  special  benefits  accruing  to  the  property 
in  the  district,  there  must  be  notice  and  opportunity  for 
hearing  allowed  to  the  taxpayer  before  such  tribunal  on  the 
question  of  the  benefits  accruing  to  his  property,  and  the 
amount  of  tax  to  be  assessed  against  him.^  It  is  not 
enough  that  he  may  by  chance  have  notice,  or  as  a  matter  of 
fact  have  a  hearing.  It  is  immaterial  that  the  assessment 
has  in  fact  been  fairly  apportioned.  The  constitutional 
validity  of  the  law  is  to  be  decided,  not  by  what  has  been 
done  under  it,  but  by  what  by  its  authority  may  be  doue.-^ 
The  construction  of  the  State  statutes  by  the  State  courts 
as  requiring  notice  will  however  be  conclusive  upon  the 
Supreme  Court. 

1  Norwood  V.  Baker,  172  U.  S.  269,  I.e.  293. 

2  Hagar  v.  Reclamation  District,  supra,  §  319,  and  cases  cited . 

3  Stuart  V.  Palmer,  74  N.  Y.  183;  St.  Louis  v.  Ranken,   96   Mo.  497; 
Heth  V.  Radford,  96  Va.  272. 


§   377  SPECIAL  ASSESSMENTS.  467 

But  due  process  of  law  does  not  require  in  special  assess- 
ments, any  more  than  in  general  taxation,  that  there  should 
be  a  formal  or  plenary  judicial  proceeding  or  any  interpo- 
sition of  judicial  authority.  The  assessment  and  collection 
of  taxes,  general  and  special,  belong  to  the  legislative  and 
executive,  and  not  to  the  judicial,  departments  of  the 
government.  Neither  is  a  rehearing  or  new  trial  essential 
to  due  process  of  law.i 

The  general  rules  stated  in  Chapter  XI  as  to  the  essen- 
tials of  notice  apply  to  special  assessments,  subject  to  the 
distinction  stated,  that  there  is  a  reason  for  notice  and 
opportunity  for  hearing  which  does  not  exist  in  general 
taxation.  The  publication  of  a  notice  that  it  is  proposed 
to  present  a  petition  for  a  public  improvement  is  a  suffi- 
cient notification  to  those  interested  in  the  question,  when 
such  notice  carries  with  it  an  opportunity  to  be  heard. 2 

§  377.  Notice   and   hearing  under   legislative  apportion- 
ment. 

When  the  apportionment  is  not  made  by  commissioners 
or  other  quasi  judicial  authority,  but  by  the  legislature, 
such  legislative  determination  may  exclude  any  subsequent 
hearing  upon  the  question  determined.  This  question  was 
decided  by  the  Supreme  Court  ^  iu  affirming  the  judgment 
of  the  New  York  Court  of  Appeals.  The  court  said  that 
when  the  determination  of  the  lands  to  be  benefited  is 
intrusted  to  commissioners,  its  owners  may  be  entitled 
to  notice  and  hearing  upon  the  question  whether  their  lauds 
have  been  benefited,  and  how  much.  But  the  leo-jslature 
has  the  power  to  determine  by  the    statute     imposing    the 

1  See  Chapter  XI,    "Essentials  of  Notice  and  Hearing,"      See   also 
Lent  V.  Tillson,  supra,  §  328;  Paulsen  v.  Portland,  149  U.  S.  30. 

2  F.illbroolj  Irrigation  Districts.  Bradley, swpm,  §  362;  Hagar  v.  Recla- 
mation District,  supra,  §  319. 

3  Spencer  v.  Merchant,  supra,  §  375. 


468  SPECIAL  ASSESSMEMTS.  §   377 

tax  what  lands,  which  might  be  benefited  by  the  tax, 
are  in  fact  benefited  by  it,  and  if  it  does  so,  the  deter- 
mination is  conclusive  upon  the  owners  and  the  courts. 
The  owners  in  such  case  have  no  right  to  a  hearing  upon 
the  question  whether  their  lands  are  benefited,  but  only 
upon  the  validity  of  the  assessment  and  its  apportionment 
among  the  different  parcels  of  the  class  decided  upon  by 
the  legislature.  This  is  in  accordance  with  the  general 
principle  that  there  is  no  right  to  a  hearing  upon  a  question 
which  has  been  determined  by  the  exercise  of  legislative 
discretion. 

But  this  rule,  that  notice  and  hearing  are  not  required  where 
they  can  be  of  no  effect,  has  been  applied  not  only  to  the 
leo-islative  creation  of  the  taxino-  district  and  determination 
of  what  part,  if  any,  of  the  total  cost  is  to  be  assessed  upon 
the  district,  but  further  to  the  decision  by  the  legislature 
as  to  the  basis  of  apportionment  within  the  district,  that 
is,  whether  according  to  special  benefits,  or  value,  or  area, 
or  frontage.  Therefore,  if  that  body  concludes  that  the 
cost  shall  be  assessed  according  to  special  benefits  or  ac- 
cordino-  to  value,  the  determination  of  such  benefit  or  value 
requires  notice  and  opportunity  for  hearing.  But  if  the 
legislature  determines  for  itself  that  an  apportionment 
according  to  area,  or  according  to  frontage,  corresponds 
to  the  benefits  received,  it  follows  that  the  calculation 
on  that  basis  is  a  mere  matter  of  figures,  and  no  notice  or 
hearing  thereon  is  required.^  It  results  therefore  that 
the  establishment  of  such  a  rule  of  area  or  frontage  ex- 
cludes the  consideration  of  special  benefits. 

Theoretically  this  determination  by  legislative  or  munici- 

1  Iu*Amery  17.  Keokuk,  72  Iowa  701  it  was  said:  "It  appears  to 
have  been  quite  uniformly  held  that  where  the  only  act  necessary  to 
ascertain  the  amount  of  the  assessment  upon  the  property  is  a  plain 
mathematical  calculation,  and  no  discretiori  is  left  to  the  city  council, 
no  notice  is  necessary." 


§   378  SPECIAL  ASSESSMENTS.  469 

pal  authority  is  made  upon  investigatiou  of  the  special 
benefits  accruing  to  all  the  property.  But  under  the  prevail- 
ing system  of  fixing  the  basis  of  apportionment  in  the 
charter  or  enabling  statute,  the  municipal  authorities  have 
only  the  discretion  of  determining  what  and  when  im- 
provements shall  be  made,  and  the  theory  of  "presumed 
investigation"  and  "conclusive  discretion"  in  the  exercise 
of  such  municipal  authority  may' practically  deprive  the 
property  owner,  not  only  of  any  judicial  protection,  but 
also  of  any  hearing  upon  the  question  of  benefits  from  the 
improvement. 

This  logical  outcome  of  the  premises  was  the  occasion  of 
the  sharp  division  of  the  Supreme  Court  in  the  notable  case 
of  Norwood  v.  Baker. l  AIthouo;h  that  decision  was  subse- 
quently  limited  to  its  "special  facts,"  the  re-examination 
of  tlie  fundamental  basis  of  special  assessments  in  this  and 
subsequent  cases  has  resulted  as  hereafter  shown,  not  only 
in  the  reaffirmation  of  the  salutary  principle  that  the  judi- 
cial authority  is  supreme  in  enforcing  tlie  limitations  of  the 
legislative  power,  but  also  in  the  enforcement  of  the  right 
of  the  property  owner  to  notice  and  opportunity  for  hear- 
ing upon  tlie  question  of  benefits  at  some  stage  before  the 
municipal  action  makes  the  assessment  a  binding  charge 
against  his  property. 

§  378.  Hearing  not  required  before  including  property  in 
benefited  district. 

Due  process  of  law  does  not  require  notice  to  the  prop- 
erty owner  nor  an  opportunity  for  hearing,  before  a  legis- 
lative or  municipal  authority  forms  the  taxing  district  and 
determines  the  maximum  amount  to  be  apportioned  thereto, 
provided  he  is  given  notice  and  allowed  a  hearing  as  to  the 
amount  to  be  assessed  against  his  own  property,  and  it  is 

1  Infra,  §  383. 


470  SPECIAL  ASSESSMENTS.  §   379 

provided  by  the  statute  or  charter,  as  construed  by  the 
Supreme  Court  of  the  State,  that  the  amount  of  taxes 
which  may  be  assessed  upon  any  given  parcel  shall  not 
exceed  the  benefits  thereto.  This  was  determined  by  the 
Supreme  Court  in  a  recent  case  from  Detroit, i  where  the 
court  said  that  it  was  not  necessary  for  the  property  owner 
to  have  notice  of  every  step  in  tlie  proceeding.  It  is 
sufficient  if  he  is  given  a  thoroughly  efficient  opportunity 
to  be  heard  to  test  the  legality  of  the  charge  upon  him  for 
it  is  only  witli  the  charge  upon  him  that  he  is  concerned, 
and  of  that  alone  can  he  complain.  In  the  legality  of  that 
charge  is  necessarily  involved  the  legality  of  all  which 
precedes  it  and  of  which  it  is  the  consequence.  This 
ruling  however  was  based  upon  the  finding  of  the  Su- 
preme Court  of  the  State,  that  under  the  statute  the 
amount  of  assessment  upon  any  lot  of  land  could  not  ex- 
ceed the  benefits,  and  that,  at  the  hearing  allowed  the  prop- 
erty owner,  he  could  show  that  this  rule  had  been  violated, 
and  this  showing  would  have  relieved  his  land  from  the 
tax. 

§  379.  Notice  to  parties   liable   to   be  assessed  in  street 
openings  not  required. 

Where  a  statute  providing  for  the  opening  of  streets  or 
other  public  improvements  requires  notice  to  the  parties 
whose  land  is  to  be  taken  for  public  use,  and  the  damages 
paid  for  the  property  so  taken  are  assessed  as  benefits 
against  the  property  in  a  district  which  it  is  determined  will 
be  benefited  by  the  improvement,  the  fact  that  there  Is 
no  provision  for  giving  notice  to  the  owners  of  land  liable 
to  be  assessed  for  the  improvement  by  being  included  m 
such  benefited  district  does  not  deprive  them  of  their 
property  without  due  process  of  law.  , 

1  Voigt  V.  Detroit,  184  U.  S.  115,  affirming  123  Micti.  547. 


§  379  SPECIAL  ASSESSMENTS.  471 

This  was  decided  in  another  case  from  Detroit, i  where 
it  was  argued  that  parties  liable  to  be  assessed  for  benefits 
are  as  much  interested  in  the  question  as  to  the  necessity 
of  making  the  improvement  and  the  amount  of  compensa- 
tion to  be  paid  for  the  land  taken  therefor  as  are  the  owners 
of  the  land  taken,  and  that  the  same  reasons  for  notice 
apply  in  the  one  case  as  in  the  other.  But  the  court 
said : — 

"  But  whatever  weight  be  given  to  these  authorities, 
the  law  in  this  court  is  too  well  settled  to  be  now  disturbed, 
that  the  interest  of  neighboring  property  owners,  who 
may  possibly  thereafter  be  assessed  for  the  benefit  to 
their  property  accruing  from  opening  a  street,  is  too  remote 
and  indeterminate  to  require  notice  to  them  of  the  taking 
of  lands  for  such  improvements,  in  which  they  have  no 
direct  interest.  The  position  of  the  plaintiffs  in  this 
particular  would  require  a  readjustment  of  the  entire  pro- 
ceedings, and  a  determination  of  the  property  incidentally 
benefited,  before  any  proceedings  are  taken  for  the  con- 
demnation of  land  directly  taken  or  damaged  by  such 
improvement.  It  might  be  argued  upon  the  same  lines 
that,  whenever  the  city  contemplated  a  public  improve- 
ment of  any  description,  personal  notice  should  be 
given  to  the  taxpayers,  since  all  such  are  interested  in 
such  improvements  and  are  liable  to  have  their  taxes 
increased  thereby.  It  might  easily  happen  that  a  whole 
district  or  ward  of  a  particular  city  would  be  incidentally 
benefited  by  a  proposed  improvement,  as,  for  instance, 
a  public  school,  yet  to  require  personal  notice  to  be  given 

1  Goodrich  v.  Detroit,  184  U.  S.  432,  affirming  123  Mich.  559.  In 
support  of  complainant's  contention  the  following  cases  were  cited  and 
referred  to  in  the  opinion  of  the  court,  Paul  v.  Detroit,  32  Mich.  108; 
Wells  County  v.  Fahlor,  132  Ind.  426;  State  v.  Fondulac,  42  Wise. 
287;  Stuart  v.  Palmer,  74  N.  Y.  183;  Scott  v.  Toledo,  36  Fed.  Rep.  385 
and  1  L.  R.  A.  688. 


472  SPECIAL  ASSESSMEXTS.  §   380 

to  all  the  taxpa}^ers  of  such  ward  would  be  an  intolerable 
burden.  Hence  it  has  been  held  by  this  court  that  it  is 
only  those  whose  property  is  proposed  to  be  taheii  for  a 
public  improvement  that  due  process  of  law  requires  shall 
have  prior  notice." 

It  will  be  observed  however  that  this  only  applies  to  the 
notice  and  hearing  before  the  taxing  district  is  made.  After 
the  improvement  is  ordered  and  the  taxing  district  deter- 
mined, the  right  of  the  property  owner  to  notice  and  hear- 
ing- on  the  question  of  the  validity  of  the  charge  against 
him  remains,  and  is  determined  upon  the  principles  discussed 
in  the  preceding  section. 

§  380.  Express  finding  of  benefits  not  required. 

Althouo-h  the  power  to  make  special  assessments  upon 
property  for  public  improvements  is  based  upon  the  as- 
sumption that  such  property  is  specially  benefited  to  the 
amount  of  the  assessment,  and  the  statute  may  authorize 
such  assessment  only  upon  a  prior  determination  that  the 
property  assessed  will  be  thus  benefited,  it  is  sufllcient  that 
the  proceedings  show  a  substantial  compliance  with  this 
requirement.  Due  process  of  law,  in  the  matter  of  special 
assessments  as  in  other  cases,  looks  to  substance  rather  than 
to  form.  Thus  a  statute  of  Michigan  provided  that  if  the 
common  council  believed  that  a  portion  of  the  city  would 
be  benefited  by  a  certain  improvement,  they  might  deter- 
mine that  the  whole  or  any  just  proportion  of  the  cost  of 
the  improvement  should  be  assessed,  etc.,  upon  the  real 
estate  deemed  to  be  thus  benefited,  and  thereupon  they 
should  by  resolution  fix  and  determine  the  portion  of  the 
citv  benefited,  and  specify  the  amount  to  be  assessed  upon 
the  owners  of  the  real  estate  therein.  It  was  held^  that  a 
resolution  that  the  "  common   council   do  hereby  fix  and 

1  Goodrich  v.  Detroit,  184  U.  S.  432,  439. 


§  381  SPECIAL  ASSESSMENTS.  473 

determine  that  the  following  district  is  benefited  and  that 
there  be   assessed  upon  the  several  parcels  of  real  estate 

therein  the  amount  of  dollars  in  proportion,  as  near 

as  may  be,  to  the  advantage  which  each  lot  or  parcel  is 
deemed  to  acquire  by  this  improvement,"  was  a  substantial 
if  not  a  literal  compliance  with  the  statute.  The  court 
said  that,  whether  it  was  a  compliance  or  not,  there  was  no 
want  of  due  process  of  law,  because  under  another  provi- 
sion of  the  statute,  as  construed  by  the  Supreme  Court  of 
the  State,  the  property  owner  was  entitled  to  a  hearing, 
wherein  he  could  insist  that  his  propert}^  was  not  benefited 
at  all. 

§  381.  Enforcement  of  special  assessments. 

The  subject  of  procedure  in  tax  collection,  as  discussed  in 
Chapter  XI,  applies  also  to  special  assessments  which  are 
levied  and  collected  under  the  taxing  power. i  The  rule 
requiring  due  process  of  law  is  complied  with  if  the  tax- 
payer has  a  hearing  as  to  the  validity  of  the  charge  upon 
his  property,  at  any  stage  of  the  proceedings.  Thus  if  the 
assessment  can  only  be  enforced  by  a  plenary  suit  or  a  more 
summary  form  of  judicial  procedure,  and  the  taxpayer  is 
allowe'd  an  opportunity  to  set  up  any  defense  as  to  the 
legality  of  the  charge,  the  requirements  of  due  process  of 
law  are  satisfied.  In  !?ome  States  the  taxpayer  is  allowed 
to  appear  before  the  council  or  other  municipal  authority, 
and  make  his  objections  both  as  to  the  necessity  of  the  im- 
provement, and  also  to  the  apportionment  of  benefits 
between  the  city  and  the  district.  Then,  in  a  suit  to  enforce 
the  collection  of  the  assessment,  he  is  limited  to  questions 
relating  to  the  performance  of  the  work,  and  such  limita- 
tion when  notice  and  opportunity  for  hearing  are  afforded 
before  the  work  is  done,  is  no  violation  of  due  process  of 
law. 

1  Speer  v.  Athens  (Geo.),  9  L.  R.  A.  402. 


474  SPECIAL  ASSESSMENTS.  §  382 

It  was  said  in  a  recent  opinion  of  the  Supreme  Court,i  in 
a  suit  to  enjoin  the  collection  of  an  assessment  for  opening 
a  street,  that  the  plaintiff  could  not  urge  as  a  ground  of  in- 
junction that  the  lands  in  the  condemnation  proceeding 
were  defectively  described.  Not  only  was  it  a  collateral 
matter  so  far  as  plaintiff  was  concerned,  but  it  is  extremely 
doubtful  whether  a  simple  misdescription  involves  any  Fed- 
eral question'  whatever. 

But  it  was  held  in  a  State  court  2  that  a  clause  of  a  city 
charter,  providing  that  the  owner  of  real  estate  should, 
within  sixty  days  from  the  date  of  the  issuance  of  the  tax 
bill,  file  with  the  Board  of  Public  Improvements  a  written 
statement  of  all  his  objections  to  the  validity  of  the  bill, 
and  that  in  a  suit  on  the  tax  bill  no  objection  should  be 
pleaded  other  than  those  which  had  been  so  filed,  was  void 
as  a  deprivation  of  property  without  due  process  of  law, 
and  that  plaintiff  could  make  all  the  defenses  to  the  tax 
bill  allowed  by  law  regardless  of  such  provision.  The 
court  said  in  this  case  that  there  is  a  distinction  between 
requiring  a  man,  who  proposes  taking  some  aflirmative  legal 
action,  to  do  so  within  a  limited  time  and  requiring  him  to 
state  in  advance  his  defenses  to  a  future  suit.  The  law 
does  not  compel  a  man  who  is  unassailed  to  pay  any  atten- 
tion to  unlawful  pretenses  which  are  not  asserted  by  posses- 
sion or  suit. 

§  382.  Conclusiveness  of   State  determination. 

In  the  determination  of  any  question  of  fact  such  as  the 
necessity  for  a  public  improvement,  the  amount  of  special 
benefit  accruing  to  the  district,  or  valuations  in  the  appor- 
tionment of  special  assessments,  the  decision  of  the  proper 

1  Goodrich  v.  Detroit,  184  U.  S.  432. 

2  Barber  Asphalt  Paving  Co.  v.  Rich,  Sup.  Ct.  of  Missouri,  68  S.  W, 
Rep.  1043. 


§  383  SPECIAL  ASSESSMENTS.  475 

State  tribunal,  in  the  absence  of  actual  fraud  and  bad  faith, 
is  conclusive.^  Erroneous  decisions  on  questions  of  fact 
submitted  to  such  tribunals  do  not  violate  any  provision  of 
the  Federal  Constitution. 2  Even  bad  faith  or  fraud  on  the 
part  of  State  officials  making  the  assessment  involves  no 
constitutional  element,  and  the  remedy  therefor  depends 
upon  the  ordinary  jurisdiction  of  courts  of  justice  over  that 
class  of  cases.  When  the  matter  comes  before  the  Supreme 
Court  on  writ  of  error  to  the  highest  court  of  the  State, 
only  the  Federal  question  can  be  considered,  and  the  court 
in  considering  that  question  is  concluded  by  the  construc- 
tion of  the  State  statute  by  the  State  court. ^  The  same 
rule,  that  the  State  court's  construction  is  conclusive,  ap- 
plies  if  the  case  is"  construed  by  the  Supreme  Court  on 
appeal  from  the  United  States  Circuit  Court. 

§  3So.   Supreme  Court  in  Xorvvood  v.  Baker. 

The  principle  of  the  conclusiveness  of  legislative  determin- 
ation in  fixing  the  basis  of  apportionment  in  special  assess- 
ments and  the  exclusion  of  any  consideration  of  special 
benefits  in  the  enforcement  of  special  assessments  upon 
such  statutory  apportionment,  which  seemed  to  have  be- 
come thoroughly  intrenched  in  American  jurisprudence, 
received  a  severe  shock  from  the  decision  of  the  Supreme 
Court  in  the  case  of  Norwood  v.  Baker,  decided  in  1898 


*  It  was  held  ia  California,  Ramish  v.  Hartwell,  126  Cal.  443,  that  while 
the  legislature  had  no  power  to  make  the  recitals  of  bands  issued,  payable 
from  proceeds  of  special  assessments,  conclusive  evidence  of  the  validity 
of  the  lien  for  street  improvements,  the  recitals  could  be  made  conclusive 
evidence  of  the  regularity  of  the  proceedings  not  essential  to  jurisdic- 
tion of  the  officers  to  create  the  assessment. 

2  Fallbreok  Irrigation  District  v.  Bradley,  16t  U.  S.  112, 1.  c.  167;  see 
also  Lent  v.  Tillson,  140  U.  S.  315. 

3  For  a  forcible  illustration  of  this  see  King  v.  Portland,  184  U,  S.  61; 
Voigt  V.  Detroit,  supra,  §  378;  Goodrich  v.  Detroit,  supra,  §  380. 


476  SPECIAL  ASSESSMENTS.  §   383 

on  appeal  from  the  United  States  Circuit  Court,  Southern 
District  of  Ohio.i 

The  constitution  of  Ohio  authorized  the  taking  of  pri- 
vate property  for  the  purpose  of  making  public  roads,  on 
paying  to  the  owner  compensation  to  tlie  amount  assessed 
by  a  jury  without  deduction  for  benefits.     The  statutes  of 
Ohio  provided,  in  case  of  the  opening  of  a  new  road,  for  a 
special  assessment  by  the  front  foot  upon  bounding  and 
abutting  property  of  the  entire  cost  and  expense  of  the  im- 
provement, making  no  provision  for  the  consideration  of 
special     benefits.     A     street    was     opened    through    the 
property    of    complainant   three    hundred    feet    long  and 
fifty   feet    wide,    to    connect    two    streets  of  that    width 
which  ran  from  each  end    of    complainant's  property    in 
opposite    directions.       The    jury    gave    plaintiff    $2,000 
damages,  irrespective  of  any    benefits.     The  village  then 
assessed  her  with  the  cost   of   opening    and   making  this 
street,  including  the  solicitors'  and  experts'  fees    and  ad- 
vertising, in  all  $2,218.     Complainant  brought  suit  to  re- 
strain the  village  from  enforcing  this  assessment.    The  sum 
awarded  by  the  jury  had  been  paid  to  the  plaintiff,  and  it  was 
this  sum  with  costs  and  charges  which' the  village  was  under- 
taking to  assess  back  upon  her.     The  Circuit  Court  granted 
a  decree  to  plaintiff  on  the  ground  that  the  assessment  was 
in  violation  of  the  Fourteenth  Amendment,  providing  that 
no  State  should  deprive  any  citizen  of  his  property  without 
due  process  of  law. 

The  Supreme  Court,  after  holding  that  the  taking  of 
plaintiff's  land  for  the  street  was  under  the  power  of  emi- 
nent domain,  and  that  abutting  owners  may  be  subjected 
to  special  assessments  to  meet  the  expenses  of  opening  pub- 
lic highways  in  front  of  their  property,  said,  by  Justice 
Harlan  :2  "Such  assessments,  according  to  well-estabHshed 
principles,  rest  upon  the  ground  that  special  burdens  may 

1  172  U.  S.  269. 

2  ].  c.  page  278. 


§  383  SPECIAL  ASSESSMENTS.  477 

be  imposed  for  special  or  peculiar  benefits  accruing  from 
public  improvements ; ' '  and  ' '  if  the  State  constitution  does 
not  prohibit,  the  legislature,  speaking  generally,  may  create 
a  nevv  taxing  district,  determine  what  property  shall  belong 
to  such  district,  and  what  property  shall  be  considered  as 
benefited  by  a  proposed  improvement. ' ' 

"  But  the  power  of  the  legislature  in  these  matters  is  not 
nnhmited.  There  is  a  point  beyond  which  the  legislative 
department,  even  when  exerting  the  power  of  taxation,  may 
not  go  consistently  with  the  citizen's  right  of  property. 
As  already  indicated,  the  principle  underljing  special  assess- 
ments to  meet  the  cost  of  public  improvements  is  that  the 
property  upon  which  they  are  imposed  is  peculiarly  bene- 
fited, and  therefore  the  owners  do  not,  in  fact,  pay  any- 
thing in  excess  of  what  they  receive  by  reason  of  such 
improvement.  But  the  guaranties  for  the  protection  of 
private  property  would  be  seriously  impaired,  if  it  were 
estabhshed  as  a  rule  of  constitutional  law,  that  the  imposi- 
tion by  the  legislature  upon  particular  private  property  of 
the  entire  cost  of  a  public  improvement,  irrespective  of  any 
peculiar  benefits  accruing  to  the  owner  from  such  improve- 
ment, could  not  be  questioned  by  him  in  the  courts  of  the 
country.  It  is  one  thing  for  the  legislature  to  prescribe  it 
as  a  general  rule  that  property  abutting  on  a  street  opened 
by  the  public  shall  be  deemed  to  have  been  specially  bene- 
fited by  such  imj^ii'ovement,  and  therefore  should  specially 
contribute  to  the  cost  incurred  by  the  public.  It  is  quite  a 
different  thing  to  lay  it  down  as  an  absolute  rule  that  such 
property,  whether  it  is  in  fact  benefited  or  not  by  the 
opening  of  the  street,  may  be  assessed  by  the  front  foot  for 
a  fixed  sum  representing  the  whole  cost  of  the  improve- 
ment, and  without  any  right  in  the  property  owner  to 
show,  when  an  assessment  of  that  kind  is  made,  or  is  about' 
to  be  made,  that  the  sum  so  fixed  is  in  excess  of  the  bene- 
fits   received. 


478  SPECIAL  ASSESSMENTS.  §   383 

"  In  our  judgment,  the  exaction  from  the  owner  of  pri- 
vate property  of  the  cost  of  a  public  improvement  in  sub- 
stantial excess  of  the  special  benefits  accruing  to  him  is,  to 
the  extent  of  such  excess,  a  taking,  under  the  guise  of  taxa- 
tion, of  private  property  for  public  use  without  compensa- 
tion. We  say  "  substantial  excess,"  because  exact  equality 
of  taxation  is  not  always  attainable,  and  for  that  reason  the 
excess  of  cost  over  special  benefits,  unless  it  be  of  a  mate- 
rial character,  ought  not  to  be  regarded  by  a  court  of  equity 
when  its  aid  is  invoked  to  restrain  the  enforcement  of  a 
special  assessment."     *     *     * 

After  reviewing  authorities,  the  court  proceeds:  — 
"  It  wiU  not  escape  observation  that  if  the  entire  cost  in- 
curred by  a  municipal  corporation  in  condemning  land  for 
the  purpose  of  opening  or  extending  a  street  can  be  assessed 
back  upon  the  abutting  property,  without  inquiry  in  any 
form  as  to  the  special  benefits  received  by  the  owner,  the 
result  will  be  more  injurious  to  the  owner  than  if  he  had 
been  required,  in  the  first  instance,  to  open  the  street  at 
his  own  cost,  without  compensation  in  respect  of  the  land 
taken  for  the  street;  for,  by  opening  the  street  at  his  own 
cost,  he  might  save  at  least  the  expense  attending  formal 
proceedings  of  condemnation.  It  cannot  be  that  any  such 
result  is  consistent  with  the  principles,  upon  which  rests  the 
power  to  make  special  assessments  upon  property  in  order 
to  meet  the  expense  of  public  improvements  in  the  vicinity 
of  such  property." 

It  was  not  necessary  for  plaintiff  to  show  the  excess  of 
cost  over  her  special  benefits,  as  the  assessment  was  by  the 
front  foot  irrespective  of  special  benefits,  so  that  the  as- 
sessment was  illegal  in  itself,  because  it  rested  upon  a  basis 
which  excluded  any  considerations  of  benefits.  The  decree 
enjoining  the  whole  assessment  was  therefore  the  only 
proper  one.  But  the  injunction  did  not  prevent  a  re-avS- 
sessment  for  such  amount  as  could  be  assessed  against  the 


§   384  SPECIAL  ASSESSMENTS.  479 

property  upon  a  due  and  proper  inquiry  as  to  the  special 
benefits  accruing. 

The  court  added  that  the  assessment  was  also  invalid 
under  the  constitution  of  Ohio  which  required  that  compen- 
sation be  made  for  private  property  taken  for  public  use, 
and  that  such  compensation  be  assessed  without  any  deduc- 
tion for  benefits  to  the  property  of  the  owner.  This  pro- 
vision would  be  of  little  practical  value  if,  upon  the  open- 
ing of  a  public  street  through  private  property,  the  owner 
could  be  assessed,  not  only  for  an  amount  equal  to  the 
benefits  received,  but  also  for  such  additional  amount  as 
would  meet  the  excess  of  expense  over  the  benefits. i 


§  384.  Norwood    v.    Baker    in    State   courts  and   United 
States  courts. 

So  firmly  had  the  rule  of  legislative  conclusiveness  be- 
come established  in  the  different  States  that  this  decision  in 
many  places  put  a  stop  to  public  work,  especially  in  locali- 
ties where  the  area  and  frontage  rules  were  established  by 
statute  or  city  charters  excluding  the  consideration  of  special 
benefits  in  individual  cases.  The  Supreme  Court  of  the 
District  of  Columbia  held  that  the  decision  invalidated  all 
procedures  which  did  not  provide  a  judicial  inquiry  as  to 
special  benefits. 

In  some  of  the  State  courts  this   construction  was  given 

1  Justice  Brewer,  -with  whom  Justices  Shiras  and  Gray  concurred,  dis- 
sented on  tlie  ground,  among  others,  that  when  a  public  improvement 
has  been  made,  it  is,  beyond  question,  a  legislative  function  to  determine 
conclusively  the  area  benefited  thereby.  The  opinion  of  the  majority,  he 
said,  went  so  far  as  to  hold  that  the  legislative  determination  is  not  con- 
clusive, and  that  in  all  cases  there  must  be  a  judicial  inquiry  as  to  the 
area  in  fact  benefited,  adding:  "  We  have  often  held  the  contrary,  and 
I  think  should  adhere  to  those  oft-repeated  rulings." 

2  Fay  V.  Springfield,  94  Fed.  Rep.  409;  Loeb  v.  Trustees,  91  Fed.  Rep. 
37;  Charles  v.  Marion  City,  98  Fed.  Rep.  166;  Cowley  u.  Spokane,  99  Fed. 
Rep.  840;  Davidson  v.  Wight,  16  D.  C.  App.  371;  Lyon  v.  Tonawanda, 
98  Fed.  Rep.  361;  Parker  v.  Detroit,  103  Fed.  Rep.  357. 


480  SPECIAL  ASSESSMENTS.  §  384 

to  the  decision,  wliile  others  limited  the  case  to  the  special 
facts,  involving  both  the  power  of  eminent  domain  and  the 
right  of  assessment  for  public  improvements,  and  held 
that  their  method  of  apportionment  of  costs  by  the  area  and 
frontage  rules  did  not  necessarily  come  within  the  scope  of 
the  judgment.  The  latter  was  the  decision  in  Missouri, i 
Michigan, 2  North  Dakota, ^  Illinois,*  Pennsylvania ,5  New 
York, 6  California,'^  Wisconsin,  ^  and  Kentucky. ^  In  In- 
diana i*^  it  was  held  by  the  Supreme  Court  that  a  statute, 
which  authorized  the  improvement  of  a  street  and  the  as- 
sessment of  the  cost  under  the  frontage  rule,  was  made 
valid  by  the  allowance  to  property  owners  of  opportunity 
for  a  hearing  as  to  special  benefits,  the  frontage  rule  being 
considered  to  raise  only  a  prima  facie  standard.  It  was 
said  however  that  prior  to  the  decision  in  Norwood  v. 
Baker  the  ordinance  would  have  been  held  valid  without 
the  provision  for  hearing. 

The  Supreme  Court  of  Massachusetts  held  l^  that  the  as- 
sessment upon  the  property-owners  of  the  exjDense  of  water- 
ing the  streets  under  the  frontage  rule  was  approximately 
an  accurate  method  of  determining  the  benefits,  and  there- 
fore distinguished  the  case  from  Norwood  v.  Baker. 

The  Supreme  Court  of  Minnesota, 12  following  Norwood 
V.  Baker,  held  that  the  principle  involved  was  not  confined 

J  French  v.  Barber  Asphalt  P.  Co.,  158  Mo.  534. 

2  Cass  Farm  Co.  v.  Detroit,  124  Mich.  433. 

3  Webster  v.  Fargo,  9  N.  Dak.  208. 

4  Farrellu.  West  Chicago  Park  Commissioners,  182  111.  250. 

s  Harrisburg  y.  McPherran,  200  Pa.  343 ;  aJiter,  Scranton  v.  Levers, 
9  Pa.  Dist.  176. 

6  Conde  v.  City  of  Schenectady,  164  N.  Y.  258. 
^  Hadley  v.  Dague,  130  Cal.  207. 

8  Gleason  v.  Waukesha  Co.,  103  Wis.  225. 

9  City  of  Augusta  v.  McKibben,  22  Ky.  Law  Rep.  1224. 
w  Adams  v.  Shelbyville,  154  Ind.  467. 

n  Sears  v.  Boston^  173  Mass.  71. 

^  Ramsey  County  v.  Robt.  P.  Lewis  Co.,  53  L.  R.  A.  421,  I.  c.  p.  423. 


§  384  ■        SPECIAL  ASSESSMENTS.  481 

to  a  street  opening  case,  but  extended  to  all  cases  of  local 
public  improvements ;  that  the  real  principle  involved  was 
that  of  having  a  basis  of  apportionment  upon  the  abutting 
property,  which  should  exact  contribution  only  in  consid- 
eration of  special  benefits,  and  that  this  appeared  from 
the  dissenting  opinion  of  Justice  Brewer.  The  court 
therefore  held  invalid  the  assessment  of  the  annual  frontage 
taxes  for  water  pipes  laid  in  front  of  the  lots  assessed,  say- 
ino-:  "  Prior  to  the  appearance  of  the  case  of  Norwood  v. 
Baker,  perhaps  the  trend  of  the  decisions  in  this  country 
was  in  support  of  the  theory  that  the  legislative  power  in 
respect  to  special  assessments  was  practically  unlimited, 
and  since  that  case  was  decided,  the  State  courts  have  not 
been  agreed  as  to  its  scope  and  meaning.  Probably  no  de- 
cision emanating  from  the  Supreme  Federal  Court  for  many 
years  has  been  so  sweeping  and  at  the  same  time  so  im- 
perfectly understood  and  applied."  The  court  said  in  aon- 
cluding,  at  page  427  : — 

"  The  stake  driven  by  the  decision  in  Norwood  v.  Baker 
is  timely.  Judicial  expression  on  the  subject  was  indefinite. 
There  was  a  tendency  to  lose  sight  of  the  equitable  basis 
which  justifies  the  assessment  upon  private  property  of  the 
cost  of  public  improvements.  The  arbitrary  act  of  the 
leo-islative  body  was  often  accepted  as  final  without  regard 
to  its  justice.  It  is  to  be  hoped  that  the  highest  court  of 
the  land  has  spoken  finally  and  will  not  recede  from  its 
position."! 

1  After  the  above  decision  was  announced,  the  Supremo  Court  de- 
cided the  case  of  French  v.  Barber  Asphalt  Paving  Co.,  and  the  other 
cases  in  181  U.  S.,  infra.  Thereupon  the  Minnesota  court,  by  the  same 
judge,  on  June  18,  1901,  sustained  a  motion  for  rehearing  and  reversed 
the  former  decision,  saying  that  4f  the  case  was  one  of  fioal  jurisdicMon 
of  that  court  it  would  adliere  to  its  former  opinion.  But  after  consider- 
ing the  decision  of  the  Supreme  Court  in  French  v.  Barber  Asphalt  Pav- 
ing Co.  and  the  other  cases  concurrently  decided,  wherein  that  court 
attempted  to  qualify  and  limit  the  principles  appUedia  Norwood  v.  Baker, 

31 


482  SPECIAL  ASSESSMENTS.     -         §  385 

§  385.  Norwood  v.  Baker  limited  to  its  *'  special  facts." 

But  the  far-reaching  character  of  the  decision  in  Nor- 
wood V.  Baker  and  the  widel}^  different  judicial  views  as  to 
its  effect  resulted  in  a  number  of  cases  from  different  parts 
of  the  country,  involving  the  validity  of  systems  of  pro- 
cedure under  the  area  and  frontage  rules  of  apportionment. 
These  were  appealed  to  the  court,  and  having  been  advanced 
upon  the  docket,  were  heard  together  at  the  October  term, 
1900.  One  of  them^  was  from  Missouri,  wherein  the  Su- 
preme Court  of  that  State  had  declined  to  apply  the  doctrine 

it  was  in  doubt  as  to  the  effect  of  these  holdings.  It  did  not  appear  that 
the  Supreme  Court  had  directly  denied  the  soundness  of  the  rule  an- 
nounced, yet  it  seemed  to  intend  to  hold  that  '♦  the  principle  will  not 
apply  when  in  conflict  with  the  systems  of  taxation  as  adopted  by  a  State, 
unless,  in  some  special  case,  peculiar  and  extraordinary  hardship  is  the 
result.  In  other  words,  it  is  not  the  principle  or  rule  of  assessment 
whioh  is  the  test  of  the  validity  of  the  State  act,  but,  rather,  the  effect 
of  the  application  of  the  rule  in  particular  cases.  It  may  be  a  sound 
rule  in  one  case,  and  not  in  another.  It  would  be  useless  at  this  time  to 
further  attempt  to  define  the  position  of  the  Federal  court  as  expressed 
in  its  later  decisions."  The  court  said  that  its  own  decisions  had  sus- 
tained this  method  of  assessment,  State  v.  Robert  P.  Lewis  Co.,  72  Minn. 
87,  and  42  L.  R.  A.  639.  It  therefore  reversed  its  decision,  being  influenced 
by  the  fact  that  the  property  owner  might  have  its  final  conclusion 
reviewed  by  the  Supreme  Court  of  the  United  States  on  writ  of  error,  but 
if  it  adhered  to  its  former  decision  the  judgment  would  be  conclusive. 
53  L.  R.  A.  428. 

The  decision  in  Norwood  v.  Baker  was  followed  and  applied  in  Texas, 
Hutcheson  v.  Storrie,  92  Texas  685,  and  45  L.  R.  A.  289,  where  the  front- 
age rule  to  the  exclusion  of  special  benefits  was  held  invalid.  But  in 
Ohio,  Schroder  v,  German,  47  L.  R.  A.  156,  the  court  refused  to  declare  a 
frontage  assessment  invalid,  holding  that  the  Norwood  case  did  not  con- 
trol, because  it  appeared  that  an  issue  was  made  by  the  pleadings, 
whether  the  land  assessed  was  in  fact  benefited,  which  issue  was  found 
by  the  trial  court  against  the  complainant,  and  furthermore  it  was 
neither  shown  nor  claimed  that  the  expense  was  not  fairly  apportioned 
between  plaintiff's  property  and  other  property  affected  by  the  assess- 
ment. It  was  not  necessary  that  the  council's  proceedings  should  show 
afiirmatively  that  the  question  of  benefit  to  the  lands  was  taken  into  con- 
sideration in  the  levying  of  the  assessment. 

1  French  v.  Barber  Asphalt  Co.,  181  U.  S.  324. 


§385  SPECIAL  ASSESSMENTS.  483 

of  Norwood  v.  Baker  to  tax  bills  levied  according  to  the 
frontage  rule  for  street  improvements  in  Kansas  City. 
Another  had  been  appealed  from  a  similar  decision  upon  the 
frontage  rule  by  the  Supreme  Court  of  the  State  of  North 
Dakota. 1  The  others  were  two  frontage  rule  cases,  one 
from  tli5*Supreme  Court  of  Michigan  2  and  the  other  from 
the  Supreme  Court  of  Illinois,^  and  an  area  rule  case,  in- 
volving the  construction  of  a  sewer,  from  the  Supreme  Court 
of  Missouri.* 

In  all  of  these  cases  the  State  courts  had  alBrmed  the 
validity  of  the  tax  bills  or  tax  procedure,  declining  to  apply 
the  rule  of  Norwoods.  B.aker,  so  that  in  each  case  a  writ  of 
error  was  taken  out  by  the  party  affirming  that  he  was  de- 
prived of  his  property  without  due  process  of  law.  At  the 
same  time  there  were  presented  to  the  court  cases  appealed 
from  the  United  States  Circuit  Courts  in  the  Northern  Dis- 
trict of  New  York  ^  and  the  Eastern  District  of  Michigan,^ 
wherein  those  courts  had  enjoined  the  enforcement  of  the 
frontage  rule,  and  also  a  case  from  the  Court  of  Appeals  of 
the  District  of  Columbia, 7  which  had  applied  the  rule  of 
Norwood  V.  Baker,  under  the  Fifth  Amendment  to  the 
Constitution  and  held  invalid  the  procedure  established  by 
Act  of  Congress  for  the  opening  and  improvement  of  streets 
in  that  jurisdiction.  In  all  of  these  cases  the  Supreme 
Court,  opinion  by  Judge  Shiras,  held  that  the  tax  assess- 
ments apportioned  according  to  the  frontage  and  area  rule, 
with  no  hearing  as  to  special  benefits,  involved  no  depriva- 
tion of  property  without  due  process  of  law;   that  the  case 

1  Webster  v.  Fargo,  181  U.  S.  394. 

2  Cass  Farm  Co.  v.  Detroit,  181  U.  S,  396. 

3  Farrell  v.  West  Chicago  Park  Commissioners,  181  U.  S.  404. 
*  Shumate  v.  Hemau,  181  U.  S.  402. 

6  Tonawanda  v.  Lyon,  181  IJ.  S.  389. 
6  Detroit  v.  Parker,  181  U.  S.  399. 
^  Wight  V.  Davidson,  181  U.  S.  371. 


484  SPECIAL  ASSESSMENTS.  §   385 

of  Norwood  v.  Baker  was  to  be  "  limited  to  its  special 
facts  "  and  was  not  intended  to  establish  the  principle,  in- 
deed it  did  not  necessarily  import,  that  the  assessment  of 
the  cost  of  a  local  improvement  against  abutting  property 
according  to  frontage  was  invalid  unless  the  law  provided 
for  a  preliminary  hearing  as  to  the  benefits  to  l>e  derived 
by  the  property.  The  court  said  its  legal  effect  was  only 
to  prevent  the  enforcement  of  the  particular  assessment  in 
question,  adding,  page  345  :  — 

"  That  this  decision  did  not  go  to  the  extent  claimed  by 
the  plaintiff  in  error  in  this  case  is  evident,  because  in  the 
opinion  of  the  majority  it  is  expressly  said  that  the  decision 
was  not  inconsistent  with  our  decisions  in  Parsons  v.  Dis- 
trict of  Columbia,  170  U.  S.  45,  56,  and  in  Spencer  v. 
Merchant,  125  U.  S.  345,  357. 

"  It  may  be  conceded  that  courts  of  equity  are  always 
open  to  afford  a  remedy  where  there  is  an  attempt,  under 
the  guise  of  legal  proceedings,  to  deprive  a  person  of  his 
life,  liberty  or  propert}^  without  due  process  of  law.  And 
such,  in  the  opinion  of  the  majority  of  the  judges  of  this 
court,  was  the  nature  and  effect  of  the  proceedings  in  the 
case  of  Norwood  v.  Baker. "^ 

1  Justice  Harlan  with  Justices  McKenna  and  White  dissented  in  a 
vigorous  opinion.  As  Justices  Shiras  and  Gray  concurred  in  the  dissent- 
ing opinion  of  Justice  Brewer  in  Norwood  v.  Baker,  it  follows  that  Jus- 
tices Fuller,  Peckham  and  Brown,  who  concurred  in  the  opinion  in 
Norwood  V.  Baker,  concurred  also  in  these  decisions  limiting  it  to  its 
"special  facts."  It  was  said  in  the  dissenting  opinion,  pp.  352,  353: 
"  Does  the  court  intend  in  this  case  to  overrule  the  principles  announced 
in  Norwood  v.  Baker?  Is  it  the  purpose  of  the  court,  in  this  case,  to 
overrule  the  doctrine  that  taxation  of  abutting  property  to  meet  the  cost 
of  a  public  improvement  —  such  taxation  being  for  an  amount  in  substan- 
tial excess  of  the  special  benefits  received —  will,  to  the  extent  of  such  ex- 
cess, be  a  taking  of  private  property  for  public  use  without  compensation. 
That  taxation  of  abutting  property  to  meet  the  cost  of  a  public  improve- 
ment or  any  substantial  excess  of  the  special  benefits  is,  to  the  extent  of 
such  excess,  a  taking  of  private  property  for  public  use  without  corapen- 
tation?    The  opinion  of  the  majority  is  so  worded  that  I  am  not  able  to 


§  385  SPECIAL  ASSESSMENTS.  485 

The  court  said,  in  the  frontage  case  from  Kansas  City,  that 
there  was  no  showing  of  any  difference  in  the  value  of  the 
lots  abutting  on  the  improvement,  and  that  the  procedure 
followed  had  been  orderly,  under  the  scheme  of  local  im- 
provements prescribed  by  the  legislature  and  approved  by 
the  courts  of  the  State  as  consistent  with  constitutional 
principles. 

In  the  case  from  the  District  of  Columbia  i  the  court 
stated  that  the  District  Court  erred  in  deciding  that  it  was 
intended,  in  the  Norwood  case,  to  overrule  Bauman  v.  Eoss 
and  Parsons  v.  District  of  Columbia.  It  by  no  means  neces- 
sarily followed  that  the  construction  consistently  put  upon 
the  Fifth  Amendment,  maintaining  the  validity  of  the  Acts 
of  Congi-ess  relating  to  public  improvements  within  the 
District  of  Columbia,  was  to  be  deemed  overruled  by  a  de- 
cision concerning  the  operation  of  the  Fourteenth  Amend- 
ment in  controlling  State  legislation.  The  court  held  also 
that  the  District  Court  erred  in  its  construction  of  the  opin- 
ion in  Norwood  v.  Baker,  and  that  it  was  "  limited  to  its 
special  facts. "2 

answer  these  questions  with  absolute  confidence.  It  is  difficult  to  tell 
just  how  far  the  court  intends  to  go.  But  I  am  quite  sure,  from  the  inti- 
mations contained  in  the  opinion,  that  it  will  be  cited  by  some  as  resting 
upon  the  broad  ground  that  a  legislative  determination  as  to  the  extent 
to  which  land  abutting  on  a  public  street  may  be  specially  assessed  for 
the  cost  of  paving  such  street  is  conclusive  upon  the  owner,  and  that  he 
will  not  be  heard,  in  a  judicial  tribunal  or  elsewhere,  to  complain,  even 
if,  under  the  rule  prescribed,  the  cost  is  in  substantial  excess  of  any 
special  benefits  accruing  to  his  property,  or  even  if  such  cost  equals  or 
exceeds  the  value  of  the  property  specially  taxed." 

1  Wight  V.  Davidson,  supra. 

2  The  same  Justices  dissented.  Justice  Harlan  saying  that  he  could 
not  understand  what  was  meant  by  ''special  f acts  "  or  an  "actual  de- 
privation of  property,"  and  concluded  as  follows,  p.  388:  — 

'« I  submit  that  if  the  present  case  is  to  be  distinguished  from  Norwood 
V.  Baker,  it  should  be  done  upon  grounds  that  do  not  involve  a  misappre- 
hension of  the  scope  and  effect  of  the  decision  in  that  case.  If  Congress 
can,  by  direct  enactment,  put  a  special  assessment  upon  private  property 


486  SPECIAL  ASSESSMENTS.  §    385 

In  another  of  the  series  of  cases, ^  wherein  the  Circuit 
Court  for  the  Northern  District  of  New  York  under  author- 
ity of  Norwood  v.  Baker  had  granted  an  injunction  re- 
straining the  enforcement  of  an  assessment  for  grading 
and  paving  a  street  according  to  the  frontage  rule,  the 
court  said,  at  page  391,  in  reversing  the  judgment  of  the 
Circuit  Court,  the  same  judges  dissenting :  — 

''It  was  not  the  intention  of  the  court,  in  that  case 
(Norwoods.  Baker),  to  hold  that  the  general  and  special 
taxing  systems  of  the  States,  however  long  existing  and 
sustained  as  valid  by  their  courts,  have  been  subverted  by 
the  Fourteenth  Amendment  of  the  Constitution  of  the 
United  States.  The  purpose  of  that  amendment  is  to  ex- 
tend to  the  citizens  and  residents  of  the  States  the  same 
protection  against  arbitrary  State  legislation  affecting  life, 
liberty  and  property,  as  is  afforded  by  the  Fifth  Amend- 
ment against  similar  legislation  by  Congress.  The  case  of 
Norwood  V.  Baker  presented,  as  the  judge  in  the  court  in 
the  present  case  well  said,  'considerations  of  peculiar  and 
extraordinary  hardships,'  amounting,  in  the  opinion  of  a 
majority  of  the  judges  of  this  court,  to  actual  confiscation 
of  private  property  to  public  use,  and  bringing  the  case 
fairly  within  the  reach  of  the  Fourteenth  Amendment." 

In  yet  another  of  the  series  of  cases,  it  was  said  in  the 
prevailing  opinion :  2  "We  agree  with  the  Supreme  Court 
of  North  Dakota  in  holding  that  it  is  within  the  power  of 
the  legislature  of  the  State  to  create  special  taxing  districts 
and  to  charge  the  cost  of  a  local  improvement  in  whole  or 

to  meet  the  entire  cost  of  a  public  improvement  made  for  the  benefit  and 
convenience  of  the  entire  community,  even  if  the  amount  so  assessed  be 
in  substantial  excess  of  special  benefits,  and  therefore,  to  the  extent  of 
such  excess,  confiscate  private  property  for  public  use  without  compen- 
sation, it  should  be  declared  in  terms  so  clear  and  definite  as  to  leave  no 
room  for  doubt  as  to  what  is  intended." 

1  Tonawanda  v.  Lyon,  181  U.  S.  389. 

2  Webster  v.  Fargo,  181  U.  S.  395. 


§   386  SPECIAL  ASSESSMENTS.  487 

in  part  upon  the  property  in  said  districts,  either  according 
to  vahiation  or  superficial  area,  or  frontage,  and  that  it  was 
not  the  intention  of  this  court  in  Norwood  v.  Baker  to  hold 
otherwise." 

§  386.  Municipal  bonds  payable  from  assessments  held 
valid  noty^'itlistanding"  invalidity  of  assessment. 

It  is  a  common  practice  for  municipalities,  when  author- 
ized by  statute  or  charter,  to  provide  for  the  payment  of 
assessments  for  local  improvements  in  annual  installments, 
and  in  some  States  bonds  are  issued  by  the  municipality  pay- 
able from  the  proceeds  of  the  assessments.  The  Supreme 
Court  decided,^  in  a  suit  growing  out  of  the  decision  in 
Norwood  V.  Baker,  supra,  §  383,  that  the  invalidity  of  the 
method  of  assessment  adopted  did  not  invalidate  tlie  bonds 
provided  for  in  another  section  of  the  same  statute,  and 
therefore  constituted  no  defense  to  the  municipality  in  a 
suit  upon  the  bonds.  The  Ohio  statute,  under  which  the 
assessment  was  made  which  was  held  invalid  in  Norwood  v. 
Baker,  provided  in  another  section  for  the  issue  of  town- 
ship bonds,  which  were  payable  from  the  proceeds  of  the 
assessments,  as  they  were  paid  in  five  annual  installments 
provided  by  the  statute.  The  township  refused  to  pay  these 
bonds,  setting  up  among  other  defenses  that  the  law  under 
which  the  bonds  were  issued  had  been  held  void  by  the 
Supreme  Court  in  Norwood  v.  Baker,  and  this  defense  Avas 
sustained  by  the  United  States  Circuit  Court.  The  decision 
was  reversed  in  an  opinion  by  Justice  Harlan,  with  no  dis- 
sent.    It  did  not  follow,  said  the  court,  that,  because  the 

1  Loeb  V.  Columbia  Township  Trustees,  179  U.  S.  472.  In  Warner 
V.  City  of  New  Orleans,  31  C.  C.  A.  238,  defendant  had  purchased  the 
drainage  system  then  in  process  of  construction  from  the  contractor, 
paying  therefor  in  warrants  and  covenanting  to  facilitate  the  application 
of  the  drainage  assessments  to  the  payment  of  the  warrants.  The  city 
abandoned  the  work,  and  the  State  court  decided  that  the  assessments 


488  SPECIAL  ASSESSMENTS.  §   386 

assessment  was  invalid,  in  that  it  precluded  inquiry  in  re- 
spect to  special  benefits,  the  township  could  escape  liability 
on  the  bonds.  The  power  to  issue  the  bonds  to  raise  the 
money,  and  the  mode  in  which  the  township  should  raise  the 
necessary  sums  to  pay  the  bonds  when  due,  as  well  as  the 
interest  accruing  thereon  from  time  to  time,  were  distinct 
and  separable  matters.  It  was  admitted  that  there  was 
some  ground  for  saying  that  the  legislature  would  not  have 
passed  the  act  without  the  section  providing  for  assessment 
by  the  frontage  rule ;  but  the  court  thought  that  this  was 
not  so  manifestly  the  case  as  to  justify  the  refusal  to  execute 
the  valid  part  of  the  statute,  when  that  could  be  done  in 
harmony  with  the  intention  of  the  legislature  to  have  the 
improvement  in  question  made  by  the  township,  and  the 
cost  met  by  issuing  bonds. 

It  was  argued  that  the  bonds  were  payable  only  out  of 
the  proceeds  of  the  assessment,  and  on  this  point  the  court 
said,  p.  490: — 

' '  The  relief  asked  and  the  only  relief  that  could  be 
granted  in  the  present  action,  is  a  judgment  for  money. 
If  the  township  should  refuse  to  satisfy  a  judgment  rendered 
against  it,  and  if  appropriate  proceedings  are  then  instituted 
to  compel  it  to  make  an  assessment  to  raise  money  suffi- 
cient to  pay  the  bonds,  the  ciuestion  will  then  arise  whether 
the  mode  prescribed  by  the  third  section  of  the  act  of  1893 
can  be  legally  pursued ;  and  if  not,  whether  the  laws  of 
the  State  do  not  authorize  the  adoption  of  some  other  mode 
by  which  the  defendant  can  be  compelled  to  meet  the  obli- 
gations it  assumed  under  the  authority  of  the  legislature  of 
the  State.  All  that  we  now  decide  is  that,  even  if  the  third 
section  of  the  State  statute  in  question  be  stricken  out  as 
invalid,  the  petition  makes  a  case  entitling  the  plaintiff  to  a 

were  not  collectible  because  the  property  assessed  would  not  be  bene- 
fited. On  appeal  the  city  was  held  estopped  to  deny  the  validity  of  the 
assessments  and  was  liable  to  account  for  the  fund  as  if  collected. 


§   387  SPECIAL  ASSESSMENTS.  489 

judgment  against  the  township.  Whether  a  judgment  if 
rendered  could  be  collected,  without  further  legislation, 
depends  upon  considerations  that  need  not  now  be  ex- 
amined." 

The  enforcement  of  such  a  judgment  would  depend  upon 
the  construction  of  the  statute  authorizing  the  issue  of  the 
bonds,  that  is,  whether  the  statute  provided  that  the  special 
assessments  alone  should  be  applied  to  the  paj^ment  of 
the  bonds,  or  the  bonds  were  general  obligations  of  the 
township  with  a  special  charge  upon  the  proceeds  of  the  as- 
sessments.! A  judgment  upon  such  bonds  has  the  effect 
of  a  judicial  determination  that  the  demand  of  the  judg- 
ment creditor  is  valid  and  what  amount  is  due  him,  but  it 
gives  him  no  new  rights  in  respect  to  the  means  of  pay- 
ment. This  would  depend,  as  stated,  upon  the  construction 
of  the  statement  under  which  the  bonds  are  issued. 

§  387.   Supreme  Court  in  King  v.  Portland. 

In  striking  contrast  with  the  division  of  the  court  in 
Norwood  V.  Baker  and  in  the  subsequent  limitation  of  that 
case  to  its  "  special  facts,"  was  the  unanimous  opinion  of 
the  court  sustaining  the  enforcement  of  a  special  assessment 
under  the  frontage  rule  in  the  city  of  Portland,  Oregon.  The 
opinion  in  this  case  was  delivered  by  Justice  McKenna,  who 
concurred  in  the  opinion  in  Norwood  v.  Baker,  and  in  the 
dissent  of  Justice  Harlan  in  the  subsequent  limitation  of 
that  case  to  its  *'  special  facts. "2 

The  charter  of  Portland  provided  that  the  city  council 

1  See  United  States  V.  Ft.  Scott,  99  U.S.  152;  United  States  i.  County 
of  Macon,  99  U.  S.  582. 

2  King  u.  Portland,  184  U.  S.  61.  The  official  syllabus  is  significant: 
"  Unler  llie  facts  of  this  case  and  the  interpretation  2;ivea  to  the  charter 
of  the  city  of  Portland  by  the  Supreme  Court  of  the  State  of  Oregon,  this 
court  is  of  opinion  that  the  plaintiffs  in  error  have  not  been  deprived  of 
their  property  without  due  process  of  law." 


490  SPECIAL  ASSESSMENTS.  .  §    387 

should  have  no  authority  to  improve  any  streets,  until  they 
should  pass  a  resolution  of  intention  so  to  do  describing  the 
improvement  and  this  resolution  should  be  posted  and 
published  for  ten  days,  the  notice  stating  the,  fact  of  the 
passao-e,  the  character  of  the  work  proposed  and  the  time 
■within  which  written  objections  or  remonstrances  would  be 
received.  K  remonstrances  were  not  filed  by  a  majority  of 
the  property  owners,  the  common  council  was  to  be  deemed 
to  have  acquired  jurisdiction.  AYhen  the  work  should  be 
substantially  completed,  the  city  engineer  must  file  with  the 
board  of  public  works  a  written  acceptance  of  the  completed 
work.  The  board  was  then  to  advertise  the  place  and  time 
when  objections  to  the  improvement  might  be  heard, 
and  any  person  might  at  that  time  appear  and  object  to  the 
acceptance.  If  there  were  no  objections,  or  if  the  objec- 
tions were  overruled,  the  board  was  to  report  to  the  council, 
and  thereupon  an  assessment  was  to  be  made  and  the  cost 
apportioned,  so  that  each  lot  abutting  on  the  street  should 
be  liable  for  the  full  cost  of  making  the  improvem^t  upon 
one-half  of  the  street  in  front  and  abutting  upon  it  and  also 
its  proportionate  share  of  improving  the  intersections  of 
two  streets. 

The  Supreme  Court  said  that  the  finding  of  the  State 
court  had  narrowed  their  inquiry.  It  must  be  accepted  as 
true  that  the  improvement  was  a  benefit  to  the  abutting 
property  equal  to  the  cost  of  the  improvement,  and  that  the 
council  apportioned  the  cost  according  to  the  benefits. 
Their  inquiry  was  therefore  confined  to  the  validity  of  the 
rule  of  assessment  and  the  question  whether  the  plaintiffs 
in  error  were  afforded  an  opportunity  to  contest  the  assess- 
ment. 

Upon  the  question  of  notice,  it  was  found  that  the  charter 
as  construed  by  the  State-  court  provided  for  successive  no- 
tices of  the  proposed  improvement,  the  inviting  of  pro- 
posals for  doing  the  work,  touching  the  acceptance  of  the 


§   387  SPECIAL  ASSESSMENTS.  491 

work  and  the  entry  of  the  assessment.  Ample  oppor- 
tunity was  thus  afforded  the  owner  to  appear  and  inter- 
pose the  constitutional  objections. 

It  was  strongly  urged  that  the  basis  of  apportionment 
was  itself  invalid,  in  that  it  made  no  taxing  district  but 
considered  each  lot  by  itself,  compelling  each  to  bear  the 
burden  of  the  improvement  in  front  of  it  without  reference 
to  any  contribution  to  be  made  by  other  property.!  Acci- 
dental circumstances  might  cause  the  greater  part  of  the  cost 
to  be  expended  in  front  of  a  single  lot,  although  those  circum- 
stances might  not  at  all  contribute  to  make  the  improve- 
ment more  valuable  to  the  lot  thus  specially  burdened,  but 
perhaps  even  have  the  opposite  consequence. 

But  the  court  replied,  p:)ge  68:  "  'If  accidental  circum- 
stances '  may  take  from  the  rule  the  effect  of  apportion-  ♦ 
ment,  they  do  not  prevent  the  application  of  the  rule  to 
cases  where  such  circumstances  do  not  exist.  Where  they 
exist  they  can  be  properly  dealt  with.  Presumably  the 
rule  of  the  Portland  charter  was  prescribed  by  the  legisla- 
ture in  view  of  the  conditions  which  existed  in  that  city  and 
in  the  expectation  that  the  common  council  would  so  ex- 
ercise its  power  and  judgment  in  the  creation  of  districts 
that  the  cost  of  the  improvement  ordered  would  be  appor- 
tioned by  the  application  of  the  rule  prescribed.  The 
expectation  has  been  justified  by  the  experience  of  the  city. 
Under  the  rule  of  the  charter,  the  opening  and  grading  of 
the  streets  have  been  done  for  years,  and  the  courts  have 
been  watchful  against  abuses,  —  watchful  to  protect  the 
rights  of  property  owners . "  2 

1  Citing  Oooley  on  Taxation,  Section  453. 

2  The  opinion  in  this  case  cites  the  opinion  in  Oregon  and  Cal.  Rail- 
road Co.  V.  Portland,  25  Or.  229.  and  22  L.  R.  A.  713,  as  illustrative  of 
the  point  that  '^  accidental  circumstances  "  would  warrant  the  court  in 
protecting  the  property  owner.  The  court  there  enjoined  the  enforce- 
ment of  an  ordiuance  for  a  special  assessment  levied  upon  the  frontage 
rule  to  pay  for  the  construction  upon  a  street  of  an  elevated  roadway. 


492  SPECIAL  ASSESSMENTS.  §   388 

§  388.  Ijegislative  power  and  special  facts. 

It  is  clearly  established  by  these  recent  decisions  ef  the 
Supreme  Court  that  the  legislative  power,  broad  and  com- 
prehensive as  it  is  in  taxation,  is  not  unlimited  and  is  not 
beyond  the  reach  of  judicial  review  and  scrutiny.  The  rule 
thus  laid  down  in  the  case  of  special  assessments  is  substan- 
tially the  same  which  has  been  declared  in  regard  to  the  re- 
quirement of  a  public  purpose  in  general  taxation  or  in  the 
enforcement  of  limitations  upon  the  legislative  power  of 
classification.  These  are  primarily  legislative  questions 
and  the  courts,  especially  the  Federal  courts,  will  only  in 
extreme  cases  review  the  exercise  of  that  discretion.  Thus 
it  is  primarily  for  the  legislature  to  determine  whether  a 
tax  is  levied  for  a  public  purpose.  But  as  was  seen  in  the 
preceding  chapter,  cases  are  not  wanting  in  which  such 
legislative  declaration  or  finding  has  been  overruled  by  the 
courts.  It  is  primarily  a  legislative  function  to  determine 
what  is  a  reasonable  classification  for  taxation,  but  this  de- 
termination is  subject  to  judicial  review. 

In  assessments  for  local  improvements,  the  questions  of 
the  necessity  for  the  public  improvement  and  the  benefit  to 
the  district  charged  therewith  are  legislative  and  not  judi- 
cial. Thus  the  legislature  may  determine  that  the  property 
drained  by  a  sewer  or  the  property  fronting  on  or  contig- 
uous to  a  street  shall  pay  the  expenses  of  the  improvement. 
But  if  a  municipality  under  legislative  authority  should 
undertake  to  make  property  which  is  not  drained  by  a  sewer 

It  said  that  the  presumption  was  that  the  council  had  done  its  duty,  but 
that  this  presumption  was  overcome  by  the  fact  that  the  rule  prescribed 
in  the  particular  case  was  so  grossly  and  palpably  unjust'and  oppressive 
as  to  show  that  the  proper  authority  had  never  determined  the  case  on 
the  principles  of  taxation.  It  was  proven  that  the  property  was  so  sit- 
uated it  could  receive  no  benefit  from  the  improvement,  which  had  never 
been  used  by  the  public  or  by  the  plaintiffs,  and,  the  court  found,  never 
would  be,  so  that  there  was  no  foundation  for  the  exercise  of  discretion 
by  the  council. 


§   388  SPECIAL  ASSESSMENTS.  493 

part  of  a  special  taxing  district  to  pa}^  for  its  construction,! 
or,  when  not  located  on  a  street  or  contiguous  thereto,  part 
of  a  taxing  district  for  its  improvement,  such  action  would 
be  a  clear  abuse  of  legislative  authority. 

The  same  principle  applies  to  the  method  of  apportion- 
ment as  between  different  parcels  of  property  included  in 
the  taxing  district.  It  is  settled  in  these  recent  cases  that 
it  is  withiu  the  legislative  power  to  establish  a  fixed  basis 
of  apportionment,  such  as  area  or  frontage,  provided  it  is 
first  determined  in  each  case  by  the  legislative  authority 
that  the  method  adopted  would  produce  approximate  equal- 
ity and  that  the  resulting  benefits  would  equal  the  cost 
apportioned  to  the  several  property  owners. 

This  is  clearlj^  established  by  the  opinion  of  the  Supreme 
Court  of  Oregon,  which  is  quoted  in  the  opinion  of  the 
Supreme  Court  in  King  v.  Portland,  p.  67,  where  the  court, 
after  describing  the  roadway  and  the  method  of  apportion- 
ment and  showing  that  the  cost  of  the  work  was  practically 
uniform  throughout,  so  that  the  assessment  according  to 
frontage  was  as  nearly  proportional  according  to  the  bene- 
fits as  could  be  devised,  says:  "  At  least  it  is  not  apparent 
that  there  is  any  substantial  excess  of  costs  above  benefits, 
nor  is  there  such  a  disproportionate  distribution  of  the 
burden  as  to  justify  the  court  in  declaring  the  assessment 
an  arbitrary  exaction  by  the  legislature.  It  is  beyond  the 
power  of  human  ingenuity  to  adopt  any  plan  or  mode  of 

1  S(ee  Sears  r.  Street  Commissioners,  173  Mass.  350.  It  was  hald  in 
Missouri,  Johnson  ?;.  Duer,  115  Mo.  366,  that  the  fact  that  part  of  the  land 
in  a  sewer  district  could  not  be  drained  by  the  sewer  was  not  a  valid 
objection  to  a  special  assessment  to  pay  for  such  sewer  on  the  part  of 
persons  whose  land  was  drained  by  it.  And  in  a  recent  case,  Heman  v. 
Schulte,  166  Mo.  409,  decided  January,  1902,  it  was  held  that,  in  a  suit 
on  a  special  tax  bill  for  sewer  construction,  it  was  not  a  valid  defense  that 
the  property  was  so  situated  in  the  sewer  district  that  it  could  not  con- 
nect with  the  sewer  except  through  intervening  property  over  which  it 
had  no  control. 


494  SPECIAL  ASSESSMENTS.  §  o89 

assessment  tliat  will  operate  to  produce  exact  uniformity, 
and  all  that  may  be  expected  is  a  reasonable  approximation 
to  such  a  standard,  and  the  rule  adopted  under  the  charter 
fulfills  the  condition  as  applied  to  the  present  controversy. 
There  is  no  doubt  that  the  property  was  benefited  in  excess 
of  the  costs  and  expenses." 

And  in  the  same  case  it  was  said  by  the  Oregon  Supreme 
Court,  after  reviewing  the  decisions  of  the  Supreme  Court, 
including  Norwood  v.  Baker:  — 

"But  we  are  inclined  to  believe  that  the  better  doctrine, 
deducible  from  adjudged  cases,  including  those  of  the  Su- 
preuie  Court  of  the  United  States,  is  that  the  assessment 
will  be  upheld  wherever  it  is  not  patent  and  obvious  from 
the  nature  and  location  of  the  property  involved,  the  dis- 
trict prescribed,  the  condition  and  character  of  the  improve- 
ment, the  cost  and  relative  value  of  the  property  to  the  as- 
sessment, that  the  plan  or  method  adopted  has  resulted  in 
imposing  a  burden  in  substantial  excess  of  the  benefits,  or 
disproportionate  within  the  district  as  between  owners. 

§  389.  Accidental  or  exceptional  circumstances. 

If  the  rule  of  apportionment  produces  approximate  equal- 
ity as  between  the  different  parcels  of  property  in  the  dis- 
trict, the  fact  that  it  may  work  injustice  in  the  case  of  any 
one  or  more  parcels  in  consequence  of  exceptional  or  acci- 
dental circumstances  will  not  render  it  invalid,  but  the  rule 
will  be  enforced  in  the  cases  where  it  may  be  applied  and 
where  such  circumstances  do  not  exist.  This  was  directly 
decided  in  the  case  last  cited,  where  the  Supreme  Court, 
after  quoting  the  language  of  the  Oregon  court  given  above, 
said:  "We  infer  that  the  plan  or  method  of  assessment 
must  have  that  result  of  itself.  If  that  result  is  produced 
by  a  particular  application  of  the  plan  or  method,  the  latter 
will  not  be  enforced."  In  other  words,  in  case  of  the  fail- 
ure in  any  particular  case  of  the  plan  which  gives  approxi- 


§   390  SPECIAL  ASSESSMENTS.  495 

mate  equality  in  the  district,  the  court  may  grant  relief, 
as  was  done  in  Oregon,  etc.,  R.  E.  Co.  v.  Portland,  suiira., 
§  387  note.  In  the  language  of  the  Supreme  Court, 
"where  such  circumstances  exist,  they  can  be  properly 
dealt  with."  The  law  on  this  subject  is  clearly  summarized 
by  the  Supreme  Court  of  Oregon,  which,  after  speaking 
of  the  presumptive  validity  of  the  assessment  as  quoted 
above,  continues  as  follows :  ^  — 

"This  must  be  so,  logically  and  necessarily,  in  view  of 
the  broad  latitude  accorded  the  legislature,  in  its  discre- 
tion, to  prescribe  the  taxing  district  and  the  manner  and 
method  of  making  the  assessment  within  the  district,  as  it 
concerns  individual  owners  and  proprietors.  As  the  writers 
say,  the  authority  of  the  legislature  in  these  respects  is 
almost  without  limit ;  yet  that  there  is  a  limit  beyond  which 
it  cannot  go,  all  will  concede.  When,  however,  it  has  exer- 
cised its  legislative  discretion,  and  prescribed  a  district 
and  adopted  a  method,  it  ought  to  be  plain  and  indisputa- 
ble that  it  has  exceeded  its  constitutional  authority,  before 
the  court  should  undertake  to  set  at  naught  its  declared 
will.  Neither  ought  the  system  to  be  condemned  because 
there  may  be  exceptions  wherein  it  would  work  a  legal  in- 
jury to  enforce  it." 

§  390.  Requirements  of  **  clue  process  of  law." 

' '  Due  process  of  law ' '  therefore  in  special  assessments 
requires,  not  necessarily  a  judicial  hearing  as  to  special 
benefits,  but  some  hearing  before  some  authority  on  the 
question,  and  this  opportunity  for  hearing  must  be  given 
before  the  action  is  taken  which  makes  the  assessment 
binding  upon  the  property,  unless,  in  the  enforcement  of 
the  assessment  by  suit,  the  taxpayer  is  allowed  to  contest 
the  question  of  benefit.    The  municipal  authorities  may  ap- 

»  King  V.  Portland,  38  Oregon  402,  1.  c.  p.  429. 


496  SPECIAL  ASSESSMENTS.  §    390 

portion  tlie  assessment  by  a  uniform  nile  such  as  frontage 
or  area,  but  this  can  only  be  done  after  determination  that 
the  benefits  to  the  property  will  equal  the  assessment. 

Thus  if  the  statute  under  which  the  village  authorities 
proceeded  in  the  case  of  Norwood  v.  Baker,  had  provided 
for  notice  and  hearing  before  them  on  the  question  of  ben- 
efits, and  they  had  thereupon  determined  that  the  benefits  to 
the  Baker  property  from  the  opening  of  the  street  would 
equal  the  assessment  apportioned  thereto,  it  is  diflicult  to  see 
how  the  assessment  could  have  been  set  aside  under  the  rule 
declared  in  King  v.  Portland.  The  ownership  by  one  per- 
son of  the  entire  tract  through  which  the  street  was  opened 
would  not  of  itself  affect  the  validity  of  the  assessment, 
neither  would  the  fact  that  the  amount  assessed  included 
the  costs  of  the  condemnation  as  well  as  the  cost  of  the 
land  appropriated,  if  it  was  determined  that  the  amount  of 
benefit  equaled  the  aggregate  cost.  The  real  difficulty  in 
the  case  was  that  the  procedure  was  based  on  the  arbitrary 
assertion  that  the  legislative  action  was  conclusive,  regard- 
less of  the  determination  of  benefits. 


CHAPTEK    XIV. 

DUE  PROCESS  OF  LAW  AND  THE  JURISDICTION  OF  THE 

STATES. 

§  391.  Tax  roust  be  levied  upon  subjects  within  jurisdiction  of  State. 

392.  Limitation  of  taxing  power  by  jurisdiction  not  dependent  on 

Fourteenth  Amendment. 

393.  Jurisdiction  of  State  in  taxation  of  property. 

394:.  State  may  tax  money  and  securities  in  its  jurisdiction  of  non- 
resident owners. 

395.  Property  in  hands  of  resident  agents  subject  to  taxing  power. 

396.  Jurisdiction  for  taxation  of  credits  not  dependent  upon  residence 

of  agent  or  of  debtors. 

397.  Credits  must  be  localized  in  jurisdiction  for  taxation. 

398.  Enforcement  of  taxes  against  non-resident  owners  of  property  in 

State. 

399.  Power  of  State  in  taxing  corporation  bondholders  through  corpo- 

ration. 

400.  State  cannot  compel  foreign  railroad  company  to  act  as  tax  col- 

lector. 

401.  State  may  make  mortgages  taxable  interests  in  real  estate. 

402.  Foreign  Held  Bonds  Case  in  part  overruled. 

403.  State  may  tax  stock  of  non-resident  holders  in  domestic  corpo-  ■ 

rations. 

404.  Non-resident  stockholder  not  taxable  in  absence  of  statute. 

405.  Due  process  of  law  in  taxation  of  interstate  properties. 

406.  Due  process  of  law  in  taxation  of  corporations. 

407.  Jurisdiction  in  taxation  over  property  of  trustees,  receivers,  etc. 

408.  State's  jurisdiction  over  property  for  taxation  summarized. 

409.  Taxation  of  business  and  license  taxation. 

410.  License  tax  on  emigrant  agent  sustained. 

411.  Taxation  and  regulation  under  police  power. 

412.  Chicago  Cigirette  Ordinance  sustained. 

413.  Limitation  of  power  to  impose  taxes  on  business. 

414.  Jurisdiction  over  persons  for  taxation. 

415-  Domicil  distinguished  from  residence  and  citizenship, 

416.  Right  to  change  domicil. 

417.  Motive  in  change  of  domicil  immaterial. 

418.  Term  "  residence"  employed  in  sense  of  "  domicil." 

419.  Due  process  of  law  and  taxation  at  domicil. 

(497) 

32 


498  STATE  JURISDICTION  IN  TAXATION.  §    391 

§  420.  Taxation  of  personal  property  situated  without  State  of  owner's 
domicil. 

421.  Taxation  of  citizens  at  domicil  on  mortgages  in  other  States. 

422.  State  may  tax  resident  stockholder  in  foreign  corporation  upon 

value  of  stock. 

423.  No  immunity  of  State  securities  from  taxation  in  other  States. 

424.  Bomicil  and  location,  as  situs  for  taxation,  in  same  State. 

425.  Double  taxation  not  presumed. 

426.  Due  process  of  law  and  double  taxation. 

427.  Double  Taxation  from  competing  State  authorities. 

428.  Interstate  comity  essential  to  avoid  double  taxation. 

429.  Duplicate  inheritance  taxation. 

430.  Question  one  of  construction  and  not  of  legislative  power. 

431.  Due  process  of  law  in  taxation  requires  legislative  authority. 

432.  State  construction  of  legislative  authority  conclusive. 

433.  Constitutionality  of  statutes  is  for  judicial,  not  executive,  deter- 

mination. 

§  391.  Tax  must  be  levied  upon  subjects  withiu  jurisdic- 
tion of  State. 

Due  process  of  law  requires,  not  only  that  the  tax  should 
be  for  a  public  purpose,  but  also  that  it  should  be  levied 
upon  subjects  of  taxation  which  are  within  the  State's 
lawful  jurisdiction.  In  taxation,  as  in  all  judicial  proceed- 
ings, the  jDOwer  of  the  State  must  be  exercised  within  its 
jurisdiction.  It  was  said  by  the  Supreme  Court^thatno 
adjudication  should  be  necessary  to  establish  so  obvious  a 
proposition  as  that  property  lying  beyond  the  jurisdiction  of 
a  State  is  not  a  subject  upon  which  her  taxing  power  can  be 
legitimately  exercised.  "  The  power  of  taxation,  however 
vast  in  its  character  and  searchiug  in  its  extent,  is  neces- 
sarily limited  to  subjects  within  the  jurisdiction  of  the  State. 
These  subjects  are  persons,  property,  and  business.  What- 
ever form  taxation  may  assume,  whether  as  duties,  imposts, 
excises,  or  licenses,  it  must  relate  to  one  of  these  sub- 
jects. It  is  not  possible  to  conceive  of  any  other,  though  as 
applied  to  them,   the  taxation  may  be  exercised  in  a  great 

1  State  Tax  on  Foreign  Held  Bonds,  15  Wall.  300, 1.  c.  319. 


§   392  STATE  JURISDICTION  IN  TAXATION.  499 

variety  of  ways.  It  may  toucii  property  m  every  shape, 
in  its  natural  condition,  in  its  manufactured  form,  and  in  its 
various  transmutations.  And  the  amount  of  the  taxation 
may  be  determined  by  the  value  of  the  property,  or  its  use, 
or  its  capacitjs  or  its  productiveness.  It  may  touch  busi- 
ness in  the  almost  infinite  forms  in  which  it  is  conducted, 
in  professions,  in  commerce,  in  manufactures,  and  in  trans- 
portation. Unless  restrained  by  provisions  of  the  Federal 
Constitution,  the  power  of  the  State  as  to  the  mode,  form, 
and  extent  of  taxation  is  unlimited,  where  the  subjects  to 
which  it  applies  are  within  her  jurisdiction." 

§  392.  Limitation  of  taxing  power  by  jurisdiction  not  de- 
pendent on  Fourteentli  Amendment. 

This  limitation  of  the  taxing  power  of  the  State  to  its 
lawful  jurisdiction  obviously  does  not  depend  upon  the  Four- 
teenth Amendment.  Like  the  limitation  which  requires 
that  the  tax  shall  be  levied  for  a  public  purpose,  this  also 
is  inherent  in  the  conception  of  a  tax.  Prior  to  the  adoption 
of  the  Fourteenth  Amendment  this  limitation  of  the  taxino- 
power  of  the  State  was  enforced  by  both  the  State  and 
Federal  courts.  A  tax  by  a  State  upon  property  without  its 
lawful  jurisdiction  is  clearly  a  taking  of  property  without 
due  process  of  law,  and  may  also  be  obnoxious  to  other 
provisions  of  the  Constitution  of  the  United  States,  such 
as  the  national  control  over  interstate  commerce.  It  may 
be  a  tax  upon  the  property  or  instrumentalities  of  the 
United  States,  or  violative  of  the  privileges  and  immunities 
of  citizens  of  other  States,  or  impair  the  obligation  of 
contracts.  But  whether  such  taxes  contravene  other  pro- 
visions of  the  Constitution  or  not,  they  are  clearly  contrary 
to  the  requirement  of  due  process  of  law. 

The  taxing  power  of  the  State  may  be  conveniently  treated 
with  reference  to  three  distinct  subjects  of  taxation,  enumer- 
ated by  Justice  Field  in  the  opinion  just  cited,  ^jro/jer^y, 


500  STATE  JURISDICTION  IN  TAXATION.  §   393 

business  and  persons.  A  State  tax,  to  be  valid  and  to  con- 
stitute due  process  of  law,  must  be  le\'ied  upon  property, 
business  or  persons  within  its  jurisdiction. 

§  393.  Jurisdiction  of  State  in  taxation  of  property 

There  can  of  course  be  no  question  as  to  the  power  of 
the  State  to  tax  all  real  property  within  its  limits.  It  is 
also  clearly  established  that  all  property,  movable  as  weU  as 
immovable,  actually  located  within  the  confines  of  the  State, 
is  subject  to  its  taxing  power,except  of  course  property  re- 
served therefrom  under  the  constitutional  provisions  already 
considered.  The  fiction  which  plays  so  important  a  part  in 
other  branches  of  the  law,  that  movable  property  has  its 
situs  at  the  domicil  of  the  owner,  has  no  apphcation  to  the 
power  of  the  State  to  subject  all  property,  movable  and  im- 
movable, within  its  limits,  to  taxation.  Movables  actually 
located  in  the  State  therefore  may  be  taxed  there,  though 
the  owner  may  be  domiciled  elsewhere.  Thus  Story  says:  i — 

"  The  general  doctrine  is  not  controverted  that,  although 
movables  are  for  many  purposes  to  be  deemed  to  have  no 
sittis  except  that  of  the  domicile  of  the  owner ;  ^^et,  this 
beino-  but  a  legal  fiction,  it  yields  whenever  it  is  neces- 
sarv  for  the  purpose  of  justice  that  the  actual  situs  of  the 
thing  should  be  examined.  A  nation  within  whose  territory 
any  personal  property  is  actually  situate,  has  an  entire 
dominion  over  it  while  therein,  in  point  of  sovereignty  and 
jurisdiction,  as  it  has  over  immovable  property  situate 
there." 

This  principle  of  public  law  has  been  repeatedly  declared 
by  the  Supreme  Court  in  relation  to  the  taxing  power  of  the 
States.    In  Coe  v.  Errol,  2  it  was  argued  that  the  logs  claimed 


1  story's  Conflict  of  Laws,  7th  Ed.,  Sec.  650. 

2  116  U.  S.  517. 


§    394  STATE  JURISDICTIOX  IX  TAXATION.  501 

to  be  in  transit  tlirough  New  Hampshire  were  taxed  to 
their  owners  in  Maine  as  part  of  their  general  stock  in 
trade.  But  the  court  held  that  this  would  have  no  influence 
on  the  decision  of  the  question  whether  they  were  taxable 
in  New  Hampshire,  saying,  at  page  524:  — 

"  We  have  no  difficulty  in  disposing  of  the  last  condition 
of  the  question,  namely,  the  fact  (if  it  be  a  fact)  that  the 
property  was  owned  by  persons  residing  in  another  State ; 
for,  if  not  exempt  from  taxation  for  other  reasons,  it 
cannot  be  exempt  by  reason  of  being  owned  by  non-resi- 
dfents  of  the  State.  We  talje  it  to  be  a  point  settled 
beyond  all  contradiction  or  question,  that  a  State  has  juris- 
diction of  all  persons  and  things  within  its  territory  which  do 
not  belong  to  some  other  jurisdiction,  such  as  the  representa- 
tives of  foreign  governments,  with  their  houses  and  effects, 
and  property  belonging  to  or  in  the  use  of  the  government 
of  the  United  States.  If  the  owner  of  personal  property 
within  a  State  resides  in  another  State  which  taxes  him  for 
that  property  as  part  of  his  general  estate  attached  to  his 
person,  this  action  of  the  latter  State  does  not  in  the  least 
affect  the  right  of  the  State  in  which  the  property  is  situ- 
ated to  tax  it  also.  It  is  hardly  necessary  to  cite  authorities 
on  a  point  so  elementary." 

§  394.  State   may  tax  money  and  securities  in  its  juris- 
diction of  non-resident  owners. 

Where  personal  property  is  located  within  the  State, 
whatever  its  form,  whether  evidences  of  debt  or  otherwise, 
it  may  be  subjected  to  the  State's  taxing  power,  irrespec- 
tive of  the  residence  of  the  owner.  Thus  the  State  may 
establish  an  indepe'^deut  sifus  for  taxation  of  bonds,  mort- 
gages and  other  securities  of  non-resident  owners,  located 
in  its  jurisdiction. 

This  principle  was  applied  in  a  recent  case  in  the  Supreme 


502  STATE  JURISDICTION  IX  TAXATION.  §    394 

Court  from  Louisiana,  where  it  was  held  ^  that  certain  notes 
and  mortgages,  which  had  been  inherited  by  a  citizen  of 
New  York  from  a  citizen  of  Louisiana,  but  were  in  the 
possession  of  an  agent,  in  New  Orleans,  were  taxable  in 
Louisiana.  The  court  said  that  the  maxim  mohlUa  sequun- 
tur  personam,  was  at  best  only  a  legal  fiction,  and  that  there 
had  been  frequent  recognition  of  the  power  of  a  State  to 
separate,  for  the  purposes  of  taxation,  the  situs  of  personal 
property  from  the  domicil  of  the  owner.  As  to  the  remark 
in  the  State  Tax  on  Foreign  Held  Bonds  Case,^  that  per- 
sonal property  consisting  of  bonds  and  mortgages  generally 
has  no  sifus  independent  of  the  owner,  the  court  said  at 
p.  320:  — 

"This  last  sentence,  properly  construed,  is  not  to  be 
taken  as  a  denial  of  the  power  of  the  legislature  to  establish 
an  independent  situs  for  bonds  and  mortgages, when  those 
properties  are  not  in  the  possession  of  the  owner,  but 
simply  that  the  fiction  of  law,  so  often  referred  to,  declares 
their  situs  to  be  that  of  the  domicile  of  the  owner,  a  decla- 
ration which  the  legislature  has  no  power  to  disturb,  when 
in  fact  they  are  in  his  possession." 

The  court  also  declared  that  there  was  nothing  in  the 
case  of  Kirtlaud  v.  Hotchkiss,^  conflicting  with  these  de- 
cisions. It  was  there  held  that  "  a  State  might  tax  one  of 
its  citizens  on  bonds  belonging  to  him,  although  such 
bonds  were  secured  by  mortgage  on  property  situated  in 
another  State,"  and  it  was  assumed  that  the  situs  of  such 
intangible  property  was  at  the  domicil  of  the  OAvner,  as 
there  was  no  legislation  in  that  State  attempting  to  set 
aside  that  general  rule  in  respect  to  the  matter  of  situs. 

It  was  further  said  that,  while,  in  the  absence  of  statute, 
bills  and  notes  are  treated  as  choses  in  action  and  are  not 

1  New  Orleans  v.  Stempel,  175  U.  S.  309. 

2  Infra,  §  399. 

3  Infra,  §  421. 


§   395  STATE  JURISDICTION  IN  TAXATION.  503 

subject  to  levy  and  sale  on  execution,  yet  by  the  statutes 
of  many  States  they  are  made  so  subject  to  seizure  and 
sale,  as  any  tangible  personal  property.  And  the  opinion 
concluded,  p.  322  :  — 

"  It  is  well  settled  that  bank  bills  and  municipal  bonds 
are  in  such  a  concrete  tangible  form  that  they  are  subject  to 
taxation  where  found,  irrespective  of  the  domicile  of  the 
owner ;  are  subject  to  levy  and  sale  on  execution,  and  to 
seizure  and  delivery  under  replevin ;  and  yet  they  are  but 
promises  to  pay  —  evidences  of  existing  indebtedness. 
Notes  and  mortgages  are  of  the  same  nature;  and  while 
they  ma}^  not  have  become  so  generally  recognized  as 
tano'ible  personal  propert}',  3  et  they  have  such  a  concrete 
form  that  we  see  no  reason  why  a  State  may  not  declare 
that  if  found  within  its  limits  they  shall  be  subject  to  tax- 
ation." 

The  same  principle  was  applied  ^  where  the  estate  of  a 
non-resident  of  Minnesota,  who  had  loaned  to  residents  of 
that  State  large  sums  upon  notes  and  mortgages,  which  were 
in  the  possession  of  a  resident  agent,  was  held  properly 
chargeable  with  taxes  on  these  securities. ^ 

§  395.  Property  in  hands  of  resident    agents  subject   to 
taxing"   power. 

In  tlie  case  of  New  Orleans  v.  Stempel,  supra,  the  notes, 
morto-aoes  and  bonds  were  in  the  possession  of  the  local 
administrator.  But  the  principle  has  been  applied  in 
numerous  cases  where  money  of  non-residents  has  been 
placed  in  the  hands  of  resident  agents  for  permanent  in- 
vestment and  reinvestment. 

Thus  it  was  held  in  a  leading  case  in  Vermont,  Catlin 
V.  Hull, ^  decided  in  1849,  that  notes,  mortgages,  etc.,  in 

1  Bristol  V.  Washington  County,  177  U.  S.  133. 

^  See  also  McCutchen  v.  Rice  County,  7  Fed.  Rep.  558. 

3  21  Vt.  152. 


504  STATE  JURISDICTION  IN  TAXATION.  §   395 

the  hands  of  a  local  agent  belonging  to  a  non-resident,  had 
a  taxable  siius  in  that  State,  the  court  sajing  in  an  opinion 
by  Judge  Poland:  "We  are  not  only  satisfied,  that  this 
method  of  taxation  is  well  founded  in  principle  and  upon 
authority,  but  we  think  it  entirely  just  and  equitable,  that, 
if  persons  residing  abroad  bring  their  property  and  invest 
it  in  this  State,  for  the  purpose  of  deriving  profit  from  its 
sudden  employment  here,  and  thus  avail  themselves  of  the 
benefits  and  advantages  of  our  laws  for  the  protection  of 
their  property,  their  property  should  yield  its  due  propor- 
tion towards  the  support  of  the  government,  which  thus  pro- 
tects it. ' '  And  the  court,  referring  to  a  qualify! ng  provision 
of  the  statute  which  is  notable  for  its  regard  to  interstate 
comity  in  taxation,  added  :  "  And  as  this  power  of  taxation 
in  this  State  is  only  to  be  exercised  in  cases,  where  such 
property  is  not  shown  to  be  taxed  to  the  real  owner,  where 
he  resides,  we  think,  that  there  is  no  reason  for  sa3-ing, 
that  this  power  has  been  attempted  to  be  exercised  in  an 
unjust  spirit,  or  that  its  exercise  shows  any  want  of  proper 
comity  in  our  State  government."  ^ 

This  principle  was  approved  by  the  Supreme  Court, 
not  only  in  New  Orleans  v.  Stempel  ^  but  also  in  Bristol 
V.  Washington  County.^  In  the  latter  case  a  citizen 
of  New  York  had,  for  many  years,  kept  a  sum  of 
money  invested  in  Minnesota,  through  a  local  agent.  It 
was  held  that  this  investment  was  subject  to  taxation  in 
Minnesota  and  that  the  amount  of  the  tax  was  a  claim 
ao^ainst  the  property  of  the  owner,  which,  after  his  death, 
could  be  proved  against  his  estate  in  that  State.  The 
court  therefore  directed  the  Circuit  Court  to  enter  judg- 

1  More  recent  judicial  utterances  In  other  States  do  not  show  this 
solicitude  lest  the  State  be  accused  of  want  of  ''  proper  comity  "  in 
taxation.     See  Sec.  427  et  seq. 

2  Supra,  Sec.  394. 

3  177  U.  S.  133;  see  also  Walker  v.  Jacks,  31  C.  C.  A.  462. 


§  395  STATE  JURISDICTION  IX  TAXATION.  505 

ment  for  the  amount  of  the  taxes  which  were  unpaid,  and 
which  were  not  barred  by  the  statute  of  limitations  of  the 
State.  In  its  opinion  it  cites  a  decision  of  the  Supreme 
Court  of  Minnesota,  which  had  held  that  this  property 
was  taxable  in  the  State. ^  The  latter  court  in  its  opinion 
said:  "Corporeal  personal  property  is  conceded  to  be 
taxable  at  the  place  where  it  is  actually  situated.  A  credit, 
which  cannot  be  regarded  as  situated  in  a  place  merely 
because  the  debtor  resides  there,  must  usually  be  con- 
sidered as  having  its  situs  wliere  it  is  owned,  —  at  the 
domicile  of  the  creditor.  The  creditor,  however,  may 
give  it  a  business  situs  elsewhere ;  as  where  he  places  it 
in  the  hands  of  an  agent  for  collection  or  renewal,  with  a 
view  to  reloaning  the  money  and  keeping  it  invested  as  a 
permanent  business. ' '  ^ 

So  clearly  established  is  this  right  to  tax  such  property 
at  the  place  of  its  actual  investment  and  employment,  that 
it  was  said  hy  the  New  York  Court  of  Appeals  :  ^ — 

"  It  is  clear  from  the  statutes  referred  to  and  the  author- 
ities cited  and  from  the  understanding  of  business  men  in 
commercial  transactions,  as  well  as  of  jurists  and  leo-is- 
lators,  that  mortgages,  bonds,  bills  and  notes  have  for 
many  purposes  come  to  be  regarded  as  property  and  not 
as  the  mere  evidences  of  debts,  and  that  they  may  thus 
have  a  sUns  at  the  place  where  they  are  found  like  other 
visible  tangible  chattels." 


^  In  re  Jtff'rson,  35  Minn.  215. 

2  To  the  same  effect  are  State  ex  rel.  Taylor  v.  St.  Louis  County  Court, 
47  Mo.  694;  People  v.  Trustees,  etc.,  48  N.  Y.  390;  Wilcox  v.  Ellis,  14 
Kansas  688;  Board  of  Supervisors  u.  Davenport,  40  111.  197.'  In  the  last 
case  the  decision  is  apparently  placed  on  the  ground  that  the  owner  of 
the  property  had  a  business  residence  in  Illinois.  But  it  appears  to 
have  been  a  case  of  actual  employment  of  the  property  in  the  State 
where  taxed,  and  is  therefore  clearly  in  line  with  the  other  cases  cited. 

3  People  ex  rel.  Jefferson  v.  Smith,  88  N.  Y.  576,  decided  in  1882. 


506  STATE  JURISDICTION  IN  TAXATION.  §   396 

The  court  held  that  under  the  New  York  statute,  which 
taxed  "  all  lands  and  all  personal  estate  wdthin  "  that  State, 
a  citizen  of  New  York  could  not  be  taxed  on  money  in- 
vested in  notes  and  mortgages  held  by  his  agents  in  another 
State.  They  said,  in  reference  to  the  case  of  Kirtland  v. 
Hotchkiss,!  that,  w^hile  the  State  couldhave  authorized  the 
taxation  of  these  securities  at  the  domicile  of  the  owner, 
according  to  their  construction  of  the  statute  the  legisla- 
ture did  not  intend  to  do  so,  and  that  a  more  accurate  state- 
ment of  the  doctrine  of  that  case  would  be  to  say  that  a 
debt  ma?/  have  its  situs  at  the  residence  of  the  creditor  and 
7nat/  be  there  taxed. 

§396.  Jurisdiction  for  taxation  of  credits  not  dependent 
upon  residence  of  agent  or  of  debtors. 

While  the  presence  of  a  resident  agent  is  of  service  in 
enabling  the  State  to  exercise  its  power  of  taxation,  its 
jurisdiction  does  not  depend  upon  that  fact,  but  upon  the 
actual  situation  of  the  property  in  the  State.  It  may  be 
difficult  to  localize  the  property  for  taxation  where  there  is 
no  resident  agent,  but  that  does  not  affect  the  question  of 
the  jurisdiction  of  the  State  when  the  locality  is  fixed. 

Thus  it  was  said  by  the  Supreme  Court  of  Indiana,^  that 
the  test  as  to  where  the  right  to  tax  property  exists  is  the 
place  of  its  location  and  use.  If  property  is  held,  owned 
and  used  in  Indiana,  it  is  taxable  there,  and  this  is  true 
whether  the  business  in  which  it  is  used  is  conducted  by 
the  owner  in  person  or  by  some  one  else  for  him.  It  is 
accordingly  quite  immaterial  whether  the  notes  or  other 
obligations  subjected  to  the  taxing  power  of  the  State  have 
been  executed  by  citizens  of  the  State  or  non-residents.-^ 


1  §  421. 

2  Buck  V.  Miller,  147  lad.  586,  and  37  L.  R.  A.  384. 

3  The    court  said  that    the   contrary    contention  suggests    a    most 
excellent  plan  by  which  the  holders  of  this  class  of  property  might  es- 


§   398  STATE  JURISDICTION  IX  TAXATION.  507 

§  3S7.  Credits  must  be  localized  in  jurisdiction  for  taxa- 
tion. 

The  principle  therefore  established  in  the  construction  of 
State  statutes,  taxing  all  property  within  the  scope  of 
their  operation,  is  that  the  State  can  tax  whatever  personal 
property  it  can  localize  within  its  jurisdiction.  In  the 
language  of  the  Supreme  Court  of  Pennsylvania,  "  there  is 
nothing  poetical  in  tax  laws.  Wherever  they  find  property 
they  claim  a  contribution  for  its  protection,  without  any 
special  respect  to  the  owner  or  his  occupation."  Credits 
owing  from  citizens  of  the  State  to  parties  outside  of  it 
obviously  cannot  be  localized  in  the  State  of  the  debtor, 
and  for  this  reason  they  were  not  included  in  the  tax  law 
of  Louisiana,  as  construed  by  its  Supreme  Court  in  New 
Orleans  v.  Stempel,  supra,  §  394.  It  seems  that,  in  orderfor 
the  debt  to  be  subject  to  the  taxing  power  of  the  State,  it 
must  be  reduced  to  a  concrete  form  and  evidenced  in  some 
tangil)le  shape,  as  in  a  note  or  other  written  obligation, 
and  must  be  actually  in  the  State  in  the  hands  of  an  agent, 
or  otherwise  localized  within  its  confines  for  permanent, 
as  distinguished  from  temporary,  use.^ 

§  398.  Enforcement  of  taxes  against  non-resident  owners 
of  property  in  State. 

Taxes  are  not  debts,  as  they  are  not  created  by  contracts, 

cape  taxation  altogether.  "For  example,  let  those  in  Ohio  convert  all 
their  means  into  bonds,  stocks,  notes  and  mortgages  issued  and  exe- 
cuted by  residents  of  Ohio,  and  let  those  in  Indiana  invest  likewise  in 
bonds,  stocks,  notes  and  mortgages,  issued  and  executed  by  residents  of 
Indiana;  and  then  let  the  holders  of  the  Ohio  securities  move  to  Indi- 
ana, and  the  holders  of  the  Indiana  securities  move  into  OLio,  and  it  is 
done.  Those  wealth-movers  must,  however,  be  careful  not  to  bring  their 
domicil  along  with  them.  They  may,  of  course,  indeed  they  must,  live 
and  do  business  in  the  State  into  which  they  move;  but  they  should  be 
cautious  to  have  their  residence  and  domicil  elsewhere." 

1  As  to  the  power  of  the  State,  where  the  creditor  is  domiciled  there- 
in, to  tax  credits  and  other  personal  property  located  in  other  states, 
see  infra,  §  420  et  seq. 


508  STATE  JURISDICTIOX  IX  TAXATION.  §   398 

but  are  based  upon  the  power  of  the  State  to  enforce  con- 
tribution from  persons  and  property  within  its  jurisdiction 
for  the  support  of  its  government.  The  point  was  raised 
in  the  case  of  Bristol  v.  Washington  County,  supra,  §  395, ^ 
that,  asthedomicil  of  the  testatrix  against  whose  estate  the 
claim  of  tlie  State  for  taxes  was  proven,  and  also  the 
domicilof  her  executor,  were  in  the  State  of  New  York,  the 
power  to  tax  could  be  exercised  only  against  the  very 
property  taxed ;  that  the  assessments  did  not  constitute 
judgments  in  personam,  and  that  judgment  on  these  assess- 
ments could  not  therefore  be  recovered  against  the  ancillary 
administrator  in  Minnesota. 

The  Supreme  Court,  following  the  Supreme  Court  of 
Minnesota,  decided  that  under  the  statute  of  that  State  for 
the  purpose  of  proof  and  payment  out  of  an  estate  in  probate, 
a  personal  tax  was  a  debt,  though  not  a  debt  in  the  usual 
acceptation  of  the  term,  saying:  "  the  obligation  to  con- 
tribute to  the  support  of  government  in  return  for  the 
protection  and  advantages  afforded  by  government  is  not 
dependent  on  contract,  but  on  the  exercise  of  the  public 
will  as  demanded  by  the  public  weKare."  The  claims  were 
therefore  properly  allowed  against  the  estate.  The  case 
of  Deweyv.Des  Moines, ^  was  distinguished,  as  there  the 
assessment  was  levied  on  real  estate  for  a  local  improvement 
without  service  upon  the  non-resident  or  his  voluntary 
appearance  or  any  consent  on  his  part  to  the  jurisdiction. 

But  in  a  recent  New  York  case  it  was  held  ^  that,  while 
the  State  had  the  power  to  levy  a  tax  upon  the  personal 
property  of  a  non-resident,  in  this  case  national  bank 
stock  in  a  New  York  City  bank,  situated  within  its  boun- 
daries and  subject  to  its  jurisdiction,  and  for  that  purpose 
to  separate  the  situs  of  the  owner  from  the  actual  situs  of 

1  §  394. 

2  Supra,  §  360. 

3  Ciiy  of  New  York  v.  McLean,  57  App.  Div.  601. 


§  399  STATE  JURISDICTION  IN  TAXATION.  509 

the  property  within  the  State,  and  to  subject  it  to  taxation 
because  it  was  within  the  State  limits,  yet  it  could  only 
enforce  payment  of  the  tax  by  virtue  of  its  jurisdiction 
over  the  property.  It  had  not  therefore  by  virtue  of  that 
jurisdiction  any  power  to  subject  the  non-resident  owner 
of  the  property  to  a  personal  liability  for  the  tax,  although 
nothing  appears  to  indicate  that  there  was  not  personal 
service  upon  the  defendant.^  The  court  based  its  decision 
upon  the  doctrine  of  Pennoyer  v.  Neff,^  and  Dewey  v.  Des 
Moines,  supra,  §  360. 

It  will  be  observed  that  in  the  Bristol  case,  supra,  the 
State  of  Minnesota  overcame  the  difficulty  of  securing  serv- 
ice of  process  in  enforcing  personal  tax  claims  against  a 
non-resident,  through  the  ancillary  administration  in  Min- 
nesota of  the  estate  of  the  deceased  non-resident  owner. 

§  399.  Power  of  State  in  taxing  corporation  bondholders 
tlirougli  corporation. 

The  practical  difficulty  of  reaching  individual  personal 
property  like  choses  in  action,  notes  and  mortgages,  for 
taxation,  has  led  to  attempts  to  reach  so  much  of  said  prop- 
erty as  was  represented  by  bonds  of  corporations.  This 
was  done  by  compelhng  all  corporations,  having  offices  in 
the  State  which  issued  bonds,  to  pay  the  tax  on  such  bonds 
and  deduct  the  amount  from  the  interest  on  the  bonds  paid 
to  the  holder.     But  it  was  held  by  the  Supreme  Court  that 

1  Justices  Van  Brunt  and  O'Brien  dissented,  saying:  "  Tlie  right  to 
tax  would  not  be  of  much  value  if  there  were  no  power  to  collect.  The 
tax  bears  the  same  relation  to  a  non-resident  as  to  a  resident,  and  as  a 
lax  is  a  debt  due  from  a  resident  and  is  collectible  by  suit,  It  would 
seem  to  follow  that  a  tax  against  a  non-resident  would  be  collectible  in 
the  same  manner  when  the  court  can  get  jurisdiction  of  the  non-resident 
by  the  service  of  process."  It  was  also  suggested  that  a  lien  could  not 
be  enforced  against  the  stock,  as  tbe  owner  had  the  certificate  and  could 
give  title  to  it  by  transfer  through  the  proper  power  of  attorney. 

2  95  U.  S.  714. 


510  STATE  JURISDICTION  IN  TAXATION.  §   400 

as  to  non-resident  bondholders,  such  taxation  was  not  a 
legitimate  exercise  of  the  taxing  power  of  the  State,  but  an 
attempt  to  reach  property  beyond  its  jurisdiction,  and  that 
the  law  sought  to  be  enforced  was  an  impairment  of  the 
obligation  between  the  corporation  and  the  bondholder. ^ 
The  tax  laws  could  have  no  extra-territorial  operation. 

In  this  case  no  reference  was  made  to  the  Fourteenth 
Amendment.  But  later, ^  the  Fourteenth  Amendment  was 
invoked  in  resisting  a  statute  directing  a  deduction  of  the 
tax  from  the  interest  paid  by  the  railroad  company  to  the 
resident  holders  of  bonds.  But  the  Supreme  Court  held 
that  as  to  such  resident  bondholders,  this  requirement  was 
within  the  lawful  power  of  the  State. 

§  400.   State  cannot  compel  foreign  railroad  company  to 
act  as  tax  collector. 

In  another  case  the  State  of  Pennsylvania  endeavored  to 
enforce  this  tax  as  to  resident  holders  of  the  bonds  of  a 
New  York  railroad  corporation  having  its  office  there,  but 
operating  part  of  its  road  in  Pennsylvania,  by  compelling 
the  corporation  to  deduct  the  tax  from  the  interest  paid 
at  its  New  York  office  to  the  holders  of  its  bonds  who  were 
residents  of  Pennsylvania.^  The  court  said  that,  if  there 
was  any  question  as  to  the  deduction  of  the  tax  from  the 

1  State  Tax  on  Foreign  Held  Bonds,  15  Wall.  300.  Justices  Davis, 
Miller  and  Hunt  dissented,  saying  that  in  their  opinion  the  State  legis- 
lature was  not  restrained  by  anything  in  the  Federal  Constitution  nor 
by  any  principle  which  that  court  could  enforce  against  the  State  court, 
from  taxing  the  property  of  persons  which  it  could  reach  and  lay  its  bands 
on,  whether  these  persons  resided  within  or  without  the  State.  See 
also  Railroad  Co.  v.  Jackson,  7  Wall.  262;  Murray  v.  Charleston,  96  U. 
S.  448. 

"*■  Bell's  Gap  R.  R.  Co.  v.  Pennsylvania,  134  U.  S.  232.  See  also 
Commonwealth©.  Delaware  Div.  Canal  Co.,  123  Pa.  St.  594,  2  L.  R.  A. 
798. 

3  Erie  Railroad  Co.  v,  Pennsylvania,  153  U.  S.  628. 


§  400  STATE  JURISDICTION  IX  TAXATION,  511 

interest  paid  to  non-resident  holders,  that  is,  to  bondhold- 
ers not  residents  of  Pennsylvania,  the  State  tax  on  Foreign 
Held  Bonds  Case  would  be  conclusive  against  the  State. 
On  the  other  hand,  the  court  distinguished  this  case  from 
the  case  last  cited,  that  of  Bell's  Gap  Eaih-oad  v.  Pennsvl- 
vania,  because  that  was  a  Pennsylvania  corporation  which 
was  compelled  to  deduct  the  tax  from  the  interest  paid  to 
Penns3'lvania  holders  of  its  bonds.  Decision  was  rendered 
against  the  State  on  the  ground  that  it  had  no  right  to 
make  the  New  York  railroad  company  its  tax  collector,  that 
is,  to  impose  upon  the  company  the  duty  of  collecting  the 
State  taxes  at  its  office  outside  of  the  jurisdiction  of  the 
Commonwealth,  and  that  it  could  not  impose  such  a  duty 
as  a  condition  of  permitting  the  New  York  railroad  com- 
pany to  perform  its  business  as  a  common  carrier  within 
the  State  of  Pennsylvania. 

It  will  be  seen  that  these  decisions  are  applicable  only  to 
bonds  of  a  railroad  company,  which  are  treated  as  debts 
having  their  situs,  for  taxation,  at  the  residence  of  their 
holders.  The  power  of  the  State  to  make  the  mortgage 
securing  the  bonds  an  interest  in  the  property  mortgaged, 
and  taxable  as  such,  was  not  before  the  court.  It  will  be 
observed  also  that  these  decisions  have  no  application  to 
the  case  of  corporate  stock  and  its  liability  to  taxation  by 
the  State  of  incorporation,  irrespective  of  the  residence  of 
the  holders. 

Public  stock,  which  is  the  form  in  which  the  indebted- 
ness of  States  and  municipalities  is  sometimes  evidenced, 
when  held  by  parties  not  domiciled  in  the  State,  is  not  sub- 
ject to  the  taxing  power  of  the  State.  Thus  a  resident  of 
New  York  was  held  not  taxable  in  Maryland  on  the  stock 
of  the  city  of  Baltimore,  the  court  saying  that  the  taxable 
situs  of  the  stock  was  at  the  domicil  of  the  owner. ^ 

1  Mayor  ?;.  Ilussey,  67  Md.  112,  the  court  fullowing  the  Tax  on  For- 
eign Held  Bonds  case,  supra,  and  Murray  v.  Charleston,  9G  U.  S.  432.     In 


512  STATE  JURISDICTION  IN  TAXATION.  §   401 

§  401.  State  may  make  mortgage  taxable  interest  in  real 
estate. 

In  the  Tax  an  Foreign  Held  Bonds  Case,  supj-a,  §  391,  the 
opinion  was  expressed  that  a  mortgage,  being  a  mere  security 
for  a  debt,  confers  upon  its  holder  no  interest  in  the  land, 
and  when  held  by  a  non-resident  is  as  much  beyond  the 
jurisdiction  of  the  State,  as  the  person  of  the  owner.  This 
declaration  was  urged  against  the  system,  adopted  by  the 
State  of  Oregon,  of  taxing  mortgages  as  interests  in  the  real 
estate.  According  to  this  system,  the  mortgage  is  made  a 
separate  interest  in  the  real  estate  for  taxation,  and  is  taxed 
to  the  mortgagee  while  the  equity,  or  the  value  of  the 
property  less  the  mortgage,  is  taxed  as  the  interest  of 
the  mortgagor.  A  California  corporation  owning  notes 
secured  by  mortgage  upon  real  estate  in  Oregon  filed 
a  biU  ag-ainst  the  enforcement  of  a  tax,  levied,  under 
this  statute,  on  their  mortgage-interest  on  the  ground 
that  the  tax  was,  in  violation  of  the  Fourteenth  Amend- 
ment, a  taking  of  property  without  due  process  of  law. 
The  court,  in  an  opinion  by  Justice  Gray,^  held  that  the  tax 
was  valid,  and,  after  analyzing  the  statute  and  showing 
that  the  personal  obligation  of  the  mortgagor  is  not  taxed, 
and  that  the  mortgagor  as  well  as  the  mortgagee  is  entitled 
to  have  deducted  from  his  own  assessment  the  amount  of 
his  indebtedness  within  the  State,  said,  page  425  :  — 

"  The  result  is  that  nothing  is  taxed  but  the  real  estate 
mortgaged,  the  interest  of  the  mortgagee  therein  being 
taxed  to  him,  and  the  rest  to  the  mortgagor.  There  is  no 
double  taxation. 2     Nor  is  any  such  discrimination  made  be- 

this  case  the  tas  had  been  deducted  from  the  interest.  The  court  held 
that  although  there  was  no  authority  for  this  action,  the  owner  was 
estopped  by  her  acquiescence  for  several  years,  so  that  it  was  in  effect 
a  voluntary  payment,  barring  her  from  recovering  it  back. 

1  Savings  Society  v.  Multnomah  County,  169  U.  S.  421,  Justices  Har- 
lan and  White  dissenting. 

2  The  statement  in  the  opinion  that  there  Is  "  no  double  taxation  "in 


§   402  STATE  JURISDICTION  JN  TAXATION.  513 

tween  mortgagors  and  mortgagees,  or  between  resident  and 
non-resident  mortgagees,  as  to  deny  to  the  latter  the  equal 
protection  of  the  laws.     *     *     * 

"  The  authority  of  every  State  to  tax  all  property,  real 
and  personal,  within  its  jurisdiction,  is  unquestionable. 
McCulloch  V.  Maryland,  4  Wheaton,  316,  429.  Personal 
property  as  this  court  has  declared  again  and  again,  may 
be  taxed,  either  at  the  domicil  of  its  owner,  or  at  the  place 
where  the  property  is  situated,  even  if  the  owner  is  neither 
a  citizen  nor  a  resident  of  the  State  which  imposes  the  tax. 
Tappan  v.  Merchants'  Bank,  19  Wall.  490,  499  ;  State  Eail- 
road  Tax  Cases,  92  U.S.  575,  607;  Coez;.Errol,  116 U.S. 
517,  524;  Pullman's  Car  Co.  r.  Pennsylvania,  141 U.  S.  18, 
22,27.  The  State  may  tax  real  estate  mortgaged,  as  it 
may  aU  other  property  within  its  jurisdiction,  at  its  fuJl 
value.  It  may  do  this,  either  by  taxing  the  whole  to  the 
mortgao^or,  or  by  taxing  to  the  mortgagee  the  interest 
therein  represented  by  the  mortgage,  and  to  the  mortgagor 
the  remaining  interest  in  the  land.  And  it  may,  for  the 
purposes  of  taxation,  either  treat  the  mortgage  debt  as  per- 
sonal property,  to  be  taxed,  like  other  choses  in  action,  to 
the  creditor  at  his  domicile;  or  treat  the  mortgagee's  in- 
terest in  the  land  as  real  estate,  to  be  taxed  to  him,  like 
other  real  property,  at  its  situs.'" 

§  402.  Foreign  Held  Bonds  Case  in  part  overruled. 

As  to  the  Foreign  Held  Bonds  Case,^  after  stating  what 
was  decided,  the  court  said  at  p.  428:  — 

*<The  remarks  in  the  opinion,  supported  by  quotations 
from  opinions  of  the  Supreme  Court  of  Pennsylvania,  that  a 

this  taxation  of  mortgages  as  real  estate  obviously  applies  only  to  the 
State  of  Oregon.     There  is    nothing  to   prevent  the    State,  where  the 
holder  of  the  mortgage  is  domiciled,  from  taxing  him  upon  the  mortgage 
as  part  of  his  personal  estate.    See  Kirtland  v.  Hotchkis;*,  infra,  §  421. 
1  15  Wall.  300. 


514  STATE  JURISDICTION  IN    TAXATION.  §   402 

mortgage,  being  a  mere  security  for  the  del)i,  confers  upon 
the  holder  of  the  mortgage  no  interest  in  the  land,  and 
when  held  by  anon-resident  is  as  much  beyond  the  jurisdic- 
tion of  the  State  as  the  person  of  the  owner,  went  beyond 
what  was  required  for  the  decision  of  the  case,  and  cannot 
be  reconciled  with  other  decisions  of  this  court  and  of  the 
Supreme  Court  of  Pennsylvania." 

After  citing  opinions  of  that  court  and  of  the  State 
courts  as  to  the  interest  of  a  mortgagee,  the  court  declared 
that  the  case  of  Kirtlandv.  Hotchkiss,  infra,  §  421,  de- 
cided only  that  debts  to  persons  residing  in  one  State, 
secured  by  mortgage  of  land  in  another  State,  might  for 
the  purpose  of  taxation  be  regarded  as  situated  at  the  domi- 
cil  of  the  creditor,  but  that  the  question  whether  the 
mortgage  could  be  taxed  there  only  was  not  involved  in  the 
case.     The  opinion  concludes,  p.  431:  — 

*'  The  statute  of  Oregon,  the  constitutionality  of  which 
is  now  drawn  in  question,  expressly  forbids  any  taxation  of 
the  promissory  note,  or  other  instrument  of  writing,  which  is 
the  evidence  of  the  debt  secured  by  the  mortgage ;  and,  with 
equal  distinctness,  provides  for  the  taxation,  as  real  estate, 
of  the  mortgage  interest  in  the  land.  Although  the  right 
which  the  mortgage  transfers  in  the  land  covered  thereby 
is  not  the  legal  title,  but  only  an  equitable  interest  and  by 
way  of  security  for  the  debt,  it  appears  to  us  to  be  clear 
upon  principle  and  in  accordance  with  the  weight  of 
authority,  that  this  interest,  like  any  other  interest,  legal 
or  equitable,  may  be  taxed  to  its  owner  (whether  resident 
or  non-resident)  in  the  State  where  the  land  is  situated, 
without  contravening  any  provision  of  the  Constitution  of 
the  United  States."  ^ 


1  In  Mackay  v.  San  Francisco,  113  Cal.  392,  this  system  was  sustained; 
gee  also  Dundee  Mortgage  Co.  v.  School  District  No.  1,  19  Fed.  Rep. 
359,  and  21  Fed.  Rep.  151. 

In  Allen  v.  National  State  Banfe,  92  Md.  509  and  52  L.  R.  A.  760,  a 


§  403  STATE  JURISDICTION^  IN  TAXATION.  515 

§  403.  State   may   tax   stock   of   non-resident   holders   in 
domestic  corporations. 

Under  the  same  principle  of  the  right  to  tax  all  property 
which  can  be  localized  in  the  jurisdiction,  a  State  may  tax 
the  capital  stock  of  its  domestic  corporations,  either  di- 
rectly to  the  corporation,  or  through  the  corporation  to 
the  individual  shareholders,  irrespective  of  their  residence, 
whether  in  or  out  of  the  State,  the  stock  havino-  a  situs 
for  taxation  at  the  domicil  of  the  corporation. i  This  is 
the  principle  adopted  in  the  taxation  of  non-resident  share- 
holders in  national  banks,  taxed  by  the  States  under  the 
authority  of  the  Act  of  Congress, 2  the  stock  of  the  non- 
resident holders  having  a  situs  for  taxation  at  the  domicil 
of  the  bank. 

In  a  recent  case,  a  statute  of  Connecticut  allowing  to 
resident  stockholders  a  deduction  from  the  assessment  of 
their  stock  at  its  market  value  'on  account  of  the  value  of 
the  real  estate  held  by  the  corporation,  although  no  such 
deduction  was  allowed  the  non-resident  shareholders,  was 
sustained  by  the  Supreme  Court,  affirming  the  judgment  of 
the  Supreme  Court  of  Connecticut. ^     The  tax  was  objected 

statute  taxing  mortgages  as  real  estate  was  sustained,  altbough  no  pro- 
vision was  made  for  deducting  the  amount  of  the  mortgage  debt  from 
any  assessment  upon  the  mortgagor,  as  in  the  Oregon  statute.  The  court 
said  (p.  615)  that  this  omission  was  *'  rather  an  objection  to  its  justice 
and  fairness  than  to  its  validity." 

In  the  Southern  Pacific  Railroad  cases,  13  Fed.  Rep.  722,  and  18  Fed. 
Rep.  385,  the  California  system  was  held  by  Justices  Field  and  Sawyer  to 
be  violative  of  the  Fourteenth  Amendment,  for  discrimination  in  excep- 
tion of  railroad  mortgages.  For  decision  of  Supreme  Court  of  Missouri 
holding  constitutional  amendmentin  that  State  introducing  the  California 
system  void  for  same  reason,  see  supra,  §  314. 

1  Street  R.  R.  v.  Morrow,  87  Tenn.  406;  St.  Albans  v.  National  Car 
Co.,  57  Vt.  68. 

2  Tappan  u.  Merchants' Bank,  19  Wall.  490;  "Taxation  of  National 
Banks,"  supra.  Chapter  IX. 

3  Travelers'  Ins.  Co.  v.  Connecticut,  22  Sup.  Ct.  Rep.  673,  affirming 
State  V.  Travelers'  Insurance  Co.,  73  Conn.  255. 


516  STATE  JURISDICTION  IN  TAXATION.  §  404 

to  on  the  ground  that  there  was  a  discrimination  between 
the  resident  and  non-resident  stockholders,  working  a  denial 
of  the  equal  protection  of  the  laws;  but  the  court  held 
that  the  discrimination  was  only  apparent,  as  the  non- 
resident stockholder  paid  no  local  taxes,  but  simply  con- 
tributed so  much  to  the  expenses  of  the  State,  while  the 
resident  stockholders  paid  no  tax  to  the  State  but  only  to 
the  municipality  in  which  they  resided. 

The  State  of  the  residence  of  the  stockholder  may  tax 
the  same  stock  as  part  of  his  personal  property,  see  §  422, 
infra . 

§  404.  Non-resident  stoekliolder  not  taxable  in  absence  of 
statute. 

But  while  a  State  has  this  power  to  tax  non-resident 
stockholders  in  domestic  corporations,  the  existence  of 
such  power  is  not  inferred,  in  the  absence  of  statute 
specifically  subjecting  such  stocks  to  taxation,  particularly 
when  it  would  involve  double  taxation  and  is  inconsistent 
with  the  general  tax  system  of  the  State.  This  was  held 
in  the  United  States  Circuit  Court  in  California  l  in  a  suit 
brought  against  Mr.  Mackay  after  he  had  removed  his 
domicil  from  the  State,  to  recover  taxes,  with  interest  and 
penalties  aggregating  nearly  $500,000,  assessed  against 
him  on  account  of  shares  in  a  number  of  corporations  or- 
ganized for  various  purposes.  These  corporations  were 
organized  under  the  laws  of  California,  and  they  had  their 
offices  in  that  State,  but  all  or  nearly  all  of  their  prop- 
erty was  in  the  State  of  Nevada.  The  court  said  that 
under  the  laws  of  California,  as  construed  by  the  Supreme 
Court  of  that  State,  the  taxation  of  corporate  property  to 
the  corporation  and  the  shares  to  the  shareholders  was 
double  taxation,  which  was  prohibited  by  the  State  consti- 

1  San  Francisco  v,  Mackay,  21  Fed.  Rep.  539. 


§   404  STATE  JURISDICTION  IN  TAXATION.  517 

tution.  This  case  again  came  up  before  the  United  States 
Circuit  Court  which  held  that  the  situs  of  money  and  sol- 
vent credits  for  the  purposes  of  taxation,  in  the  absence  of 
statute,  is  the  residence  of  the  owner,  and  defendant  was 
admitted  to  be  a  non-resident  of  California. i  As  to  the 
public  policy  which  condemned  discrimination  against  for- 
eign stockholders  in  domestic  corporations,  the  court 
said  :  — 

"The  obvious  tendency  of  discrimination,  —  double, 
unequal,  and  unjust  taxation,  —  is  to  drive  our  citizens 
having  a  large  amount  of  personal  propertj^  out  of  the 
State  to  escape  that  kind  of  oppression.  If,  notwithstand- 
ing their  departure,  they  can  still  be  taxed  upon  their  in- 
corporeal and  intangible  property  through  their  stock  in 
domestic  corporations,  and  thereby  be  taxed  on  the  same 
property  in  both  States,  the  next  step  will  be  for  business 
men  either  to  withdraw  their  investments  from  the  State, 
or  change  them  from  domestic  into  foreign  corporations,  as 
has  sometimes  been  done,  and  the  business  will  hereafter, 
to  a  large  extent,  be  carried  on  by  non-residents  in  their 
individual  characters,  or  by  foreign  corporations  over  which 
the  State  has  little  control,  and  the  State  will  be  confined 
for  its  revenue  to  the  tangible  property  of  such  non-resi- 
dents and  foreign  corporations  found  within  its  borders. 
A  policy  that  recognizes  the  principle  stated,  for  the  pur- 
pose of  taxing  the  stock  of  resident  citizens  in  foreign 
corporations,  as  following  the  person,  but  repudiates  it  for 
the  purpose  of  taxing  the  stock  of  citizens  and  residents  of 
other  States  in  domestic  corporations,  thereby  imposing 
upon  them  the  burdens  of  taxation  upon  the  same  prop- 
erty in  both  States,  cannot  fail  to  be  inimical  to  the  best 
interests  of  the  State,  and  to  discourage  investments  hy 

1  San  Francisco  v.  Mackay,  22  Fed.  Rep.  602.  See  also  State  v. 
Thomas,  26  N.  J.  L.  181,  and  §  427,  infra,  note  1. 


518  STATE  JURISDICTION  IN  TAXATION.  §   405 

both  resident  and  non-resident  capitalists,  thereby  greatly 
retardino-  the  future  development  of  its  resources.  It  also 
places  foreign  on  a  better  footing  than  domestic  corpora- 
tions, in  violation  of  the  constitution.  The  principle  should 
be  altogether  repudiated,  or  made  applicable  both  ways. 
I  cannot  impute  to  the  legislature  an  intention  to  adopt  a 
policy  so  suicidal  as  that  claimed  by  the  complainant,  with- 
out provisions  of  the  constitution  and  statutes,  indicating 
such  a  purpose,  far  more  specific  and  unmistakable  in  their 
import  than  any  yet  brought  to  my  attention." 

§  405.  Due  process    of    law    in    taxation    of    interstate 
properties. 

The  subject  of  the  taxation  of  interstate  carriers  has  been 
considered,  Chapter  VIII,  in  connection  with  the  regulation 
of  commerce.  It  was  strongly  urged  in  cases  there  referred 
to  that  the  rule  of  assessment  enforced  by  the  States  of 
Ohio  and  Kentucky  under  the  so-called  unit  rule  and  mile- 
age apportionment  was  in  effect  a  taxing  of  property  beyond 
the  jurisdiction  of  the  State,  and  so  a  denial  of  due  process 
of  law.i  The  court  held  however  in  those  cases,  against  a 
vio-orous  dissent,  that  the  valuation  of  the  property  as  a 
unit  profit -producing  plant  did  not  violate  any  Federal  re- 
striction or  tax  any  property  beyond  the  jurisdiction  of  the 
State,  as  the  attempt  was  only  to  place  a  just  value  upon 
that  part  of  the  property  which  was  within  the  State's  con- 
fines. It  was  said  however  that  the  company  had  the  right 
to  show  that  it  had  property  in  other  states  which  was  in- 
cluded in  the  total  value  and  which  did  not  properly  fall 
under  the  taxing  power  of  the  State ;  and  the  court  said 
that  if  such  facts  exist  they  should  be  taken  into  consider- 
ation by  the  State  in  its  proceedings.     But  if  the  company 

1  Adams  Express  Co.  v.  Ohio,  supra,   §  251 ;  Adams  Express  Co.  v. 
Kentucky,  swpm,  §  259. 


§   405  STATE  JURISDICTION  IN  TAXATION.  519 

does  not  make  such  disclosure,  it  cannot  complain  if  the 
State  treats  all  of  its  property  as  taxable,  that  is,  on  the 
basis  of  mileage  apportionment.  The  court  added  in  over- 
ruling the  motion  for  rehearing  in  the  Ohio  case,  page 
225:  "It  is  said  that  the  views  thus  expressed  open  the 
door  to  possibilities  of  gross  injustice  to  these  corporations, 
throuirh  conflictiuo;  action  of  the  different  States  in  matters 
of  taxation.  That  may  be  so  and  the  courts  may  be  called 
upon  to  relieve  against  such  abuses." 

The  principle  is  therefore  established  that  while  a  State 
can  only  tax  that  part  of  the  property  and  franchises  of  a 
railroad,  steamboat,  telegraph  or  other  interstate  corpora- 
tion which  is  located  within  its  limits,  it  can  in  determining 
the  value  of  that  part  consider  the  value  of  the  entire  prop- 
erty in  all  the  States  where  located  as  a  profit-producing 
unit.  It  cannot  however  determine  arbitrarily  that  the 
ratio  of  the  mileage  in  the  State  to  the  total  mileage  is  that 
part  of  the  total  value  represented  by  the  property  within 
the  State.  It  must  consider  all  the  facts  which  are  offered, 
which  tend  to  show  what  part  of  the  aggregate  value  is 
actually  within  that  jurisdiction.  The  so-called  unit  and 
mileage  rules  therefore  when  applied  to  the  valuation  of 
interstate  properties,  are  merely  admissible  rules  to  assist 
in  the  determination  of  the  value  of  the  property  actually 
employed  in  the  State,  see  Chapter  VIII.  It  is  clear 
that  if  the  State  should  refuse  to  consider  such  facts,  or  if 
for  any  reason,  either  in  the  statute  as  construed  by  the 
State  court,  or  in  the  enforcement  of  it  by  the  State  tri- 
bunal, it  should  appear  that  the  value  of  the  property 
outside  of  the  State  was  included  in  the  assessment,  there 
would  be  a  denial  of  due  process  of  law.  But,  if  the  statute 
as  construed  b}'^  the  State  court  provides  for  a  considera- 
tion of  all  the  facts,  and  an  opportunity  is  afforded  for 
hearing,  an  erroneous  determination  of  the  effect  of  the 
evidence  upon  the  valuation  ot   the    property  within   the 


520  STATE  JUEISDICTIOX  IX  TAXATION.  §   406 

State  would  not  present  any  Federal  question.  Indeed,  in 
the  absence  of  fraud  or  intentional  wrong  or  error,  there 
is  grave  doubt  whether  the  conclusions  of  the  assessing 
boards  are  subject  to  judicial  review  in  the  State  court, 
where  there  is  no  statutory  provision  for  review  by  certiorari 
or  otherwise.! 

§  406.  Due  process  of  law  in  taxation  of  corporations. 

Corporations  are  persons  within  the  meaning  of  the 
Fourteenth  Amendment,  and  are  therefore  entitled  to  due 
process  of  law.  Their  property,  whether  they  are  domes- 
tic or -foreign,  can  only  be  taxed  like  other  property  of  the 
same  class.  There  is  a  distinction  however  between  the 
taxation  of  property  of  corporations  and  that  of  individ- 
uals, which   has  been  already  illustrated  in  the  power  of 

1  Thus  it  was  held  by  the  Supreme  Court  of  Arkansas,  in  Wells, 
Fargo  &  Co.  v.  Crawford  County,  63  Ark.  576,  and  37  L.  R.  A.  371,  in  ap- 
plying to  the  taxation  of  express  companies  in  that  State  the  unit  rule 
and  mileage  apportionment,  as  sustained  by  the  U.  S.  Supreme  Court  in 
the  Ohio  and  Kentucky  cases,  that  the  statute  directing  the  board  to 
make  the  assessment  by  taking  the  same  proportion  of  the  aggregate 
value  of  the  capital  stock  of  such  express  company  as  the  number  of 
miles  of  railway  in  the  State  over  which  it  carried  on  its  business  bore 
to  the  aggregate  number  of  miles  of  railway  within  as  well  as  without 
the  State  over  which  the  company  did  business,  was  to  be  construed  as 
restricting  the  board  to  this  plan  of  assessing  plaintiff's  property  only  in 
the  absence  of  other  evidence.  It  was  the  duty  of  the  board  to  consider 
all  evidence  which  had  come  to  their  knov/ledge  concerning  the  value  of 
such  property  within  and  without  the  State.  If  therefore  the  part  of 
the  business  outside  of  the  State  was  done  on  water-ways,  this  fact  was 
to  be  considered.  The  court  must  presume  that  the  legislature  knew  it 
could  not  tax  property  situated  outside  the  limits  of  the  State,  and  this 
would  involve  the  presumption  that  there  was  no  intention  to  tax  such 
property.  Mere  error  in  the  finding  of  the  board  as  to  the  amount  of  the 
assessment  was  not  ground  for  interference  by  the  courts  in  the  absence 
of  fraud,  intentional  wrong  or  error  in  the  method  of  assessment.  The 
courts  are  powerless  to  give  relief  against  the  erroneous  judgments  of 
assessing  bodies,  except  as  they  are  specially  empowered  by  law  to 
do  so. 


§   406  STATE  JURISDICTION  IN  TAXATION.  521 

the  State  to  tax  the  stock  of  non-resident  holders  in  do- 
mestic corporations.  The  individual  cannot  be  taxed  in 
the  State  upon  his  real  estate  located  in  other  jurisdictions, 
but  the  corporation  can  be  taxed  in  the  State  of  its  iu')or- 
poration  upon  the  fall  value  of  its  capital  stock,  irrespect- 
ive of  whether  any  part  or  all  of  that  stock  is  invested  in 
real  estate  or  other  property  in  other  jurisdictions. 

This  power  of  the  State  to  tax  the  coi-porate  capital 
stock  or  corporate  property  is  distinct  from  its  power  to 
impose  a  franchise  tax,  at  discretion,  upon  the  privileo-e  of 
acting  in  a  corporate  capacity  within  its  jurisdiction.  The 
latter  power,  as  applied  to  foreign  corporations,  has  ah*eady 
been  considered.! 

Some  States,  notably  New  York,  have  adopted  the  prin- 
ciple of  taxing  both  domestic  and  foreign  corporations  upon 
that  part  of  the  corporate  stock  employed  in  the  State. 2 

The  reluctance  of  the  judiciary  to  infer  that  the  taxing 
power  has  been  exercised  unjustly  in  the  case  of  f oreio-n 
corporations,  so  that  property  outside  the  jurisdiction  of 
the  State  has  been  taxed  through  the  taxation  of  the  priv- 
ilege of  doing  business  in  the  State,  is  illustrated  by  the 
opinion  of  the  Supreme  Court  of  Pennsylvania  in  a   case 

1  See  supra,  Chapter  V,  where  it  was  shown  that  while  the  State 
cannot  tax  the  property  as  such  of  foreign  corporations  located  in  other 
jurisdictions,  it  can  impose  a  tax  upon  the  privilege  of  doing  business 
in  the  State,  which  will  in  effect  be  a  tax  upon  the  property  in  other 
jurisdictions. 

*  As  to  the  construction  of  a  statute  taxing  capital  employed  in  the 
State,  see  People  ex  rel.  v.  Campbell,  138  N.  Y.  543,  and  20  L.  R.  A.  453. 
Tlie  relator  in  that  case  was  a  New  York  corporation  holding  stock  in 
several  other  corporations,  some  domestic  and  some  foreign,  which  it 
had  received  in  compensation  for  grants  of  the  right  to  use  certain  pat- 
ents. It  was  held  that  so  much  of  the  capital  of  the  relator  as  cousisted 
of  stock  in  the  domestic  companies,  bonds  of  the  foreign  companie?  and 
patent  rights  still  remaining  undisposed  of,  was,  for  the  purposes  of  tax- 
ation, capital  •«  employed  within  the  State ;  "  but  that  stock  in  the  foreign 
companies  could  not  be  properly  included  in  that  category. 


522  STATE  JURISDICTIOX  IX  TAXATION.  §   407 

already  cited.l  The  court  said  that  it  doubted  the  power  of 
the  legislature  to  tax  the  entire  property  and  assets,  con- 
stituting the  entire  capital  stock,  of  a  foreign  corporation 
whose  interests  compelled  it  to  transact  a  portion  of  its 
business,  however  small,  within  the  State.  Great  and  far- 
reaching  as  is  the  taxing  power  of  the  State,  it  cannot 
tax  either  persons  or  property  not  within  its  jurisdiction. 
"  A  foreign  corporation  has  no  doraicil  here,  and  can 
have  none;  hence,  it  cannot  be  said  to  draw  to  itself  the 
constructive  possession  of  its  property  located  elsewhere." 
There  were  a  large  number  of  foreign  insurance  companies 
doing  business  under  State  license  in  Pennsylvania,  some 
of  them  having  a  very  large  capital.  Under  the  theory  of 
the  Commonwealth,  she  could  tax  the  entire  property 
of  such  companies  wherever  it  was  located.  The  court 
said  that  certainly  theretofore  a  sense  of  the  injustice  of 
this  view,  or  perhaps  that  courtesy  which  springs  from  the 
comity  between  the  States,  had  prevented  the  legislature 
from  asserting  a  power  of  so  doubtful  a  character,  and 
that  they  would  not  impute  such  a  purpose  to  it  then,  in 
the  absence  of  clearly  expressed  intent. 

§  407.  Jurisdiction  in  taxation  over  property  of  trustees, 
receivers,  etc. 

The  jurisdiction  of  the  State  also  extends  to  property 
therein  in  the  hands  of  trustees,  receivers  and  others  act- 
ing in  a  fiduciary  capacity,  irrespective  of  the  residence  of 
the  parties  beneficially  interested  in  the  property. 2 

1  Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  119,  snpra,  ^  178. 

2  Baldwin  v.  State,  89  Md.  587;  Stephens  v.  Railroad  Co.,  13  Blatch- 
ford,  104;  Walterdu.  Railroad  Co.,  68  Fed.  Rep.  1002;  Ex  parte  Chamber- 
lain, 55  Fed.  Rep.  704.  As  to  the  taxation  of  trust  property,  see  People 
V.  Coleman,  119  N.  Y.  137,  and  7  L.  R.  A.  407.  In  Price  v.  Hunter,  34 
Fed.  Rep.  355,  a  tax  was  held  properly  levied  upon  certain  mortgages 
held  by  a  local  trust  company,  because  the  trustee  was  domiciled  in  the 
State.  As  to  procedure  for  collection  of  State  taxes  on  property  in 
possession  of  receivers  appointed  by  Federal  courts,  see  infra,  §  541. 


§  408  STATE  JURISDICTION  IN  TAXATION.  523 

A  claim  of  non-residents  to  distributive  shares  of  prop- 
erty on  final  settlement  did  not  prevent  the  taxation  of 
funds  in  the  hands  of  a  receiver  of  a  mutual  benefit  assess- 
ment society  organized  under  the  laws  of  the  State  i  as  prop- 
erty within  its  jurisdiction,  although  the  funds  had  been 
collected  in  other  States  in  which  the  company  also  did 
business,  and  turned  over  by  orders  of  the  courts  of  those 
States  to  the  receiver,  with  the  understanding  that  all 
holders  of  certificates  in  the  diiferent  States  should  be  rat- 
ably paid  on  final  settlement. 

§  408.   State's   jurisdiction  over  property  for  taxing  pur- 
poses summarized. 

The  State  can  therefore  tax  all  property,  real  and  per- 
sonal, which  can  be  localized  within  its  jurisdiction,  includ- 
ing money,  bank  notes  and  evidences  of  debt,  such  as 
municipal  securities,  notes  and  mortgages,  found  in  the 
State  or  in  the  possession  of  residents  of  the  State,  in  the 
hands  of  the  owners  or  their  agents  or  bailees,  whether  the 
owner  is  domiciled  in  the  State  or  not ;  also  the  capital 
stock  of  domestic  corporations,  irrespective  of  the  resi- 
dence of  the  stockholders  and  the  locality  of  the  property 
represented  by  such  stock.  It  may  tax  the  property  located 
in  its  jurisdiction  of  all  foreign  corporations,  including 
those  doing  business  therein  either  under  authority  of  Con- 
gress or  through  the  comity  of  the  State,  regardless  of  the 
fact  that  such  corporations  are  taxable  upon  their  capital 
representing  such  property  by  the  State  of  their  incorpo- 
ration, and  irrespective  of  the  taxation  in  their  own  States 
of  the  non-resident  stockholders  of  such  corporations. 
The  State  may  also,  for  the  purposes  of  taxation,  treat 
mortgages  on  realty  located  in  the  State  as  interests  in  the 
realty  mortgaged,  whether  the  owners  of  such  realty  reside 
in  the  State  or  not. 

1  Schmidt  v.  Failey,  148  Ind.  160,  and  37  L.  R.  A.  442. 


524  STATE  JUEISDICTION  IN  TAXATION.  §  409 

This  comprehensive  power  of  taxation  over  property- 
found  within  its  jurisdiction  is  within  the  broad  domain  of 
legislative  power  growing  out  of  the  sovereignty  of  the 
State ;  and,  except  as  restrained  by  the  Constitution  of  the 
United  States,  the  State  may  select  one  or  more  of  these 
subjects  of  taxation  within  its  jurisdiction  in  its  own  dis- 
cretion. It  will  be  seen  however  that  there  is  a  distinc- 
tion between  property  subject  to  the  exercise  of  the  taxing 
power,  and  property  subjected  to  taxation  by  the  lawful 
exercise  of  that  power. i 

§  409.  Taxation  of  business  in  State. 

The  jurisdiction  of  the  State  extends  notonly  toi:)roperty 
located  or  employed  within  its  territory,  but  also  to  all  busi- 
ness carried  on  and  occupations  and  professions  practiced 
therein.  The  power  to  tax  property  employed  in  any  busi- 
ness conducted  in  the  State,  whether  by  individuals,  part- 
nerships or  corporations,  has  been  already  considered. 
But  the  power  of  the  State  is  not  confined  to  imposing  a 
tax  on  such  property.  It  can  tax  also  the  conduct  of  busi- 
ness itself  in  any  of  its  infinite  forms,  that  is,  the  right  or 
privilege  of  engaging  in  and  carrjnng  on  business,  profes- 
sions, manufactures,  trades  or  transportation  within  its 
limits,  whether  by  individuals,  partnerships  or  corporations, 
residents  or  non-residents.  This  comprehensive  power  of 
taxation  may  be  exercised  by  the  State  in  its  discretion, 
subject  only  to  the  restraints  of  its  own  constitution. 

Such  taxes  are  sometimes  called  by  the  generic  name  of 
"  business  "  or  "  occupation  "  taxes.  The  term  "  license  " 
may  be  contrasted  with  "  tax,"  in  that  a  license  is  required 
under  the  police  power  for  regulation,  its  issue  being  a 
condition  precedent  to  the  right  to  carry  on  a  business, 
while,  if  the  fee  charged  for  the  license  is  greater  than  the 

1  Infra,  Sec.  431. 


§   409  STATE    JURISDICTION    IN    TAXATION.  525 

expense  involved  in  the  issue  and  the  necessary  expense  of 
regulation,  its  exaction  constitutes  an  exercise  of  the  power  of 
taxation.  In  this  sense  therefore  a  license  may  exist  M'ith- 
out  the  imposition  of  a  tax,  and  a  tax  may  be  imposed  with- 
out the  granting  of  a  license.  But  as  business,  occupation 
or  privilege  taxes  are  usually  collected  through  the  issue  of 
licenses,  which  are  made  conditions  precedent  of  the  rio-ht 
to  carry  on  the  business  or  occuioatiou  or  to  exercise  th6 
privilege,  they  are  in  effect  licenses,  and  are  commonly  so 
termed. 1  It  is  in  view  of  this  distinction  between  a  license 
in  the  stricter  sense  and  a  tax,  that  the  power  is  conferred 
in  municipal  charters  to  "  license,  tax  or  regulate." 

The  power  of  the  State  to  tax  foreign  corporations  for 
the  privilege  of  doing  business  in  its  jurisdiction,  irrespec- 
tive of  its  right  to  tax  the  capital  employed  therein,  has 
been  already  considered. 2 

A  partnership,  whether  composed  of  non-residents  or 
not,  if  it  has  a  local  office  or  place  of  business,  and  so  does 
business  in  the  State,  is  clearly  subject  to  its  taxing  power, 
not  only  as  to  the  assets  emploj^ed  by  it  in  the  State  in  such 
business,  but  also  as  to  the  privilege  of  conducting  the  busi- 
ness therein.  Where  the  business  of  the  partnership  is 
thus  localized  in  the  State,  and  it  enjoys  the  protection  of 
the  State's  laws,  it  is  obviously  immaterial  to  the  taxing  ju- 
risdiction of  the  State  where  the  owners  of  the  business  are 
domiciled.  The  tax  may  be  upon  the  assets  employed  in  the 
business  or  upon  the  privilege  of  conducting  the  business 
in  the  State. 3 

The  right  to  tax  in  such  cases  rests  not  upon  the  domi- 
cil  of  the  partnership  or  person,  as  in  ordinary  personal 
property  taxation,  hereafter  considered,  but  upon  the  fact 

'■  See  License  Tax  Cases,  5  Wall.  462. 

2  Seesjtpm,  Chapter  V. 

3  Hopkins  v.  Baker  Bros.  &  Co.,  78  Md,  363,  22  L.  R.  A.  ill. 


526  STATE  JURISDICTION  IN  TAXATION.  §   411 

that  property  is  invested  and  business  transacted  in  the 
State. 

§  410.  Liicense  tax  on  emigrant  agent  sustained. 

The  comprehensive  power  of  the  State  to  tax  employ- 
ments is  illustrated  by  the  recent  decision  of  the  Supreme 
Court,  sustaining  a  license  tax  imposed  by  the  State  of 
Georgia  upon  each  emigrant  agent  or  employer  or  employee 
of  such  agent  doing  business  in  that  jurisdiction. ^  It  was 
uro-ed  that  this  was  violative  of  the  Fourteenth  Amendment 
and  impaired  the  right  of  free  egress  from  the  State.  The 
court  held  however  that  it  was  a  valid  tax  upon  the  occu- 
pation, that  its  purpose,  connected  as  it  was  with  the 
licenses  upon  other  occupations,  was  altogether  to  gain 
revenue,  and  that  no  intention  to  prohibit  the  particular 
business  could  be  imputed.  The  licenses  only  affected 
incidentally  and  remotely  the  volume  of  travel  from  the 
State  or  the  freedom  of  contract.^ 

§  411.  Taxation  and  regulation  under  police  power. 

The  power  of  taxation  in  the  licensing  of  employments 
is  closely  allied  to  the  police  power  of  regulation.  A 
license  may  be  imposed  for  the  purpose  of  regulating  an 
employment  as  a  police  measure  for  the  public  safety  and 

1  Williams  v.  Fears,  179  U.  S.  270. 

2  Iq  Fraser  v.  McConway,  82  Fed.  Rep.  257,  a  tax  levied  by  the  State 
of  Pennsylvania  upon  employers  of  foreign,  unnaturalized  males,  author- 
izing a  deduction  of  the  amount  of  the  tax  from  the  wages  of  the  em- 
plo}ees,  was  held  invalid  as  violative  of  the  Fourteenth  Amendment. 
Ill  Josi^ph  V.  Randolph,  71  Ala.  499,  a  license  tax  of  $250  exacted  by  the 
Slate  of  Alabama  from  all  emigrant  agents,  who  should  contract  in  cer- 
ta  n  designated  counties  with  laborers  to  remove  them  from  the  State, 
was  held  void  as  an  indirect  tax  upon  the  citizen's  right  of  free  egress, 
operating  to  hinder  his  personal  liberty,  and  therefore  contrary  to  both 
the  State  and  Federal  constitutions.  The  court  said  that  it  was  not  a 
tax  upon  the  right  of  hiring  laborers,  but  its  purpose  was  to  prevent  a 
free  egress  of  laborers  from  the  counties  designated  in  the  act. 


§  412  STATE  JURISDICTION  IN  TAXATION.  527 

also  as  a  means  of  revenue.  Thus  the  liquor  traffic  may 
be  prohibited  altogether  by  a  State,  or  permitted  under 
such  regulations  by  way  of  licenses  as  the  legislative  power 
deems  proper. i  As  the  legislature  has  the  power  to  pro- 
hibit absolutely  the  sale  of  intoxicating  liquors,  it  follows 
that  it  may  impose  any  conditions  or  restraints  upon  the 
traffic  which  fall  short  of  absolute  prohibition,  and  these 
conditions  and  restraints  may  take  the  form  of  a  license- 
fee  exacted  as  compensation  to  the  public. 2 

There  is  no  necessary  connection  between  a  license  and 
a  tax  upon  the  right  to  engage  in  a  business.  The  former 
confers  a  privilege,  the  latter  is  levied  for  the  exercise  of  a 
privilege.  But  both  taxation  and  regulation  may  be 
effected  in  the  form  of  a  license  by  the  same  statute.  This 
right  to  tax  and  regulate  occupations  for  purposes  of 
revenue  and  under  the  police  power  may  be  delegated  by 
the  State  to  municipalities,  and  the  latter  can  then  exercise 
such  power  without  violation  of  due  process  of  law. 

§  412.  The  Chicago  Cigarette  Ordinance  sustained. 

This  was  illustrated  in  the  recent  decision  of  the  Su- 
preme Court  3  sustaining  an  ordinance  of  the  city  of  Chicago, 
which  prohibited  the  sale  of  cigarettes  except  under  a  license 
costing  one  hundred  dollars.  The  court  said  at  page 
188:  — 

"  Regulations  respecting  the  pursuit  of  a  lawful  trade  or 
business  are  of  very  frequent  occurrence  in  the  various  cities 
of  the  country,  and  what  such  regulations  shall  be  and  to 
what  particular  trade,  business  or  occupation  they  shall  ap- 
ply, are  questions  for  the  State  to  determine,  and  their  de- 

1  Bartemeyer  V.  Iowa,  18  Wall.  129;  Beer  Co.  v.  Massachusetts,  97 
U.  S.  25;  Mugler  v.  Kansas,  123  U.  S.  623. 

2  State  V.  Bixman,  162  Mo.  1. 

3  Gundling  v.  Chicago,  177  U.  S.  183. 


528  STATE  .TUKISDICTIOX  IX  TAXATION.  §   413 

termination  comes  within  the  proper  exercise  of  the  police 
power  by  the  State,  and  unless  the  regulations  are  so  utterly 
unreasonable  and  extravagant  in  their  nature  and  purpose 
that  the  property  and  personal  rights  of  the  citizen  are 
necessarily,  and  in  a  manner  wholly  arbitrarily,  interfered 
with  or  destroyed  without  due  process  of  law,  they  do  not 
extend  beyond  the  power  of  the  State  to  pass,  and  they 
form  no  subject  for  Federal  interference." 

The  court  held  also  that  it  was  not  a  Federal  question 
whether  there  was  a  delegation  of  power  by  the  common 
councilto  the  mayor,  and  the  opinion  concluded,  p.  189  :  — 

"It  is  not  a  valid  objection  to  the  ordinance  that  it 
partakes  of  both  the  character  of  regulation  and  also  that 
of  an  excise  or  privilege  tax.  The  business  is  more  easily 
subjected  to  the  operation  of  the  power  to  regulate,  where 
a  license  is  imposed  for  following  the  same,  while  the  rev- 
enue obtained  on  account  of  the  license  is  none  the  less 
leo;al  because  the  ordinance  which  authorized  it  fulfills  the 
two  functions,  one  a  regulating  and  the  other  a  revenue 
function.  So  long  as  the  State  law  authorizes  both  regula- 
tion and  taxation,  it  is  enough,  and  the  enforcement  of  the 
of  the  ordinance  violates  no  provision  of  the  Federal  Con- 
stitution." 

It  was  not  a  Federal  question  whether  the  city  was 
authorized  by  the  State  law  to  require  the  license  fee.  In 
that  matter  the  decision  of  the  Supreme  Court  of  the  State 
was  conclusive.  The  Federal  question,  arising  under  the 
Fourteenth  Amendment,  was  whether  the  State  could 
authorize  the  passage  of  the  ordinance. 

§  413.  Limitations  of  power  to  impose  license  taxes. 

But  this  power  of  the  State  to  impose  license  taxes  upon 
occupations  must  be  exercised  subject  to  the  prohibitions 
already  considered  against  interference  with  interstate  or 
foreign  commerce.     The  State  cannot  tax  the  business  of 


§  414  STATE  JURISDICTIOX  IX  TAXATION.  529 

conducting  interstate  commerce  as  such,  nor  the  soliciting 
of  orders  through  sales  by  samples  or  otherwise,  nor  can  it 
discriminate  through  business  or  occupation  taxes  against 
the  manufacturers  of  other  States. i 

Although  the  State  may  license  occupations,  it  is  not  re- 
lieved from  the  restraints  of  the  Federal  Constitution  in  the 
taxation  of  the  property  employed  in  such  occupations. 
This,  like  any  other  property,  is  entitled  to  due  process  of 
law  and  the  equal  protection  of  the  laws  in  taxation  as  in 
any  other  exercise  of  State  powers. 

§  414.  Jurisdiction  over  persons  for  taxation. 

While  the  State,  in  the  exercise  of  the  power  of  taxation, 
may  disregard  the  fiction  that  personal  property  has  its  situs 
at  the  residence  of  the  owner,  and  may  tax  all  property 
which  it  can  find  located  within  its  jurisdiction,  it  may  also 
through  its  power  over  persons  within  its  jurisdiction,  sub- 
ject credits  and  other  personal  propert}^  owned  by  them  to 
taxation,  though  such  property  may  be  located  in  another 
State,  and,  in  the  case  of  credits,  owed  by  debtors  residing 
in  other  States  and  secured  by  property  situated  there. 

But  the  taxing  power  of  the  State  over  persons  obviously 
depends  upon  the  domicil  of  the  person,  as  domicil  is  the 
test  of  liability  for  purely  personal  taxes. 2  Domicil,  or 
habitation,  in  the  quaint  language  of  the  Massachusetts  con- 
stitution, is  "  where  a  man  dwelleth  and  hath  his  home." 

Justice  Story  says:^  "By  the  term  'domicil,'  in  its 
ordinary  acceptation,  is  meant  the  place  where  a  person 
liv^es  or  has  his  home.  In  this  sense  the  place  where  a 
person  has  his  actual  residence,  inhabitancy,  or  com- 
morancy, is  sometimes  called  his  domicile.  In  a  strict  and 
legal  sense  that  is  properly  the  domicile  of  a  person  where 

1  5Mpm,  Chapters  III  to  VI. 

2  Dccy  OQ  Conflict  of  Laws,  Am.  EL,  171. 
s  Conflict  of  Laws,  7th  Ed.,  §  41. 

3-t 


530  STATE  JURISDICTION  IN  TAXATION.  §  414 

he  has  his  true,  fixed,  permanent  home  and  principal  estab- 
lishment, and  to  which,  whenever  he  is  absent,  he  has  the 
intention  of  returning  (ammus  revertendi)."  Fact  and 
intent  therefore  must  concur  to  constitute  a  domicil. 

It  was  said  by  the  Supreme  Court  of  Massachusetts,  by 
Chief  Justice  Shaw:  i  "  No  exact  definition  can  be  given 
of  domicil ;  it  depends  upon  no  one  fact  or  combination  of 
circumstances,  but  from  the  whole  taken  together  it  must 
be  determined  in  each  particular  case.  It  is  a  maxim,  that 
every  man  must  have  a  domicil  somewhere;  and  also  that 
he  can  have  but  one.  Of  course  it  follows,  that  his  exist- 
ing domicil  continues  until  he  acquires  another ;  and  vice 
versa,  by  acquiring  a  new  domicil,  he  relinquishes  his 
former  one." 

It  follows  therefore  that  the  term"  resident"  or  "in- 
habitant" in  State  taxing  laws  must  be  construed  as 
meaning  one  who  has  his  domicil  in  the  State.  A  man  may 
have  several  residences,  but  he  can  have  only  one  domicil. 
"Where  it  is  located,  he  may  be  taxed  upon  his  personal 
})roperty  and  his  credits,  wherever  that  property  or  the 
property  securing  such  credits  may  be  located.  But  ol)- 
viously  this  tax  dependent  for  its  validity  on  jurisdiction 
over  the  domicil,  can  be  imposed  in  but  one  place,  as  the 
tax-payer  can  have  but  one  domicil,  although,  as  we  have 
seen,  the  State  having  jurisdiction  over  the  property,  also 
may  tax  it.  The  Supreme  Court  of  Massachusetts  said  in 
construing  the  word   "  habitaney  "  as   meaning  domicil :  ^ 

1  Thorndike  v.  City  of  Boston,  1  Metcalf  242,  245. 

2  Borland  v.  Boston,  132  Mass.  89.  In  this  case  Borland  left  Boston 
with  his  family  in  1876  for  Europe,  to  remain  there  an  indefinite 
time,  with  intent  to  make  some  other  place  his  home  on  his  return, 
and  while  in  Europe,  before  May  1st,  1877,  had  selected  another  city 
in  another  State  as  his  future  home,  but  remained  abroad,  without 
actually  going  to  his  new  home,  until  1879.  It  was  held  that  his 
domicil   in   Boston   for  taxation  still  continued    on  May  1,  1877,  no 


§  415  STATE  JURISDICTION  IN  TAXATION.  531 

*'  We  think,  however,  that  the  sounder  and  wdser  rule  is  to 
make  taxation  dependent  upon  domicile.  Perhaps  the 
most  important  reason  for  the  rule  is  that  it  makes  the 
standard  certain.  Another  reason  is  that  it  is  accordinir 
to  the  views  and  traditions  of  the  people." 

Thus  in  New  Jersey  a  poll  tax  levied  upon  <'  inhabit- 
ants "  was  declared  to  be  properly  levied  only  upon  those 
who  were  domiciled  in  the  State,  as  the  term  "  inhabit- 
ants" implied  more  than  mere  residents.! 

§  415.  Domicil  distinguished  from  residence  and  citizen- 
ship. 

The  domicile  which  is  the  basis  of  personal  taxation,  that 
is,  taxation  through  the  person,  is  to  be  distinguished  from 
citizenship  on  the  one  hand  and  residence  on  the  other.  A 
resident  alien,  who  never  by  naturalization,  assumes  the 
obligations  of  citizenship  or  disavows  his  allegiance  to  his 
native  country,  va-Aj  acquire  a  domicil,  and  so  subject  his 
person  to  the  taxing  power  of  the  State.  He  cannot  be 
compelled  to  perform  the  duties  of  citizenship,  but  he  can 
be  compelled  to  contribute  to  the  support  of  the  State  under 
whose  protection  he  lives,  earns  his  livelihood  and  enjoys 
his  property. 

On  the  other  hand,  the  domicil  is  distino-uished  from 
residence.  One  may  be  taxed  at  his  domicil,  though  at 
the  time  it  is  levied  he  is  actually  residing  in  another  State 
or  a  foreign  country.  A  person,  who  in  contemplation  of 
law  has  a  domicil,  may,  nevertheless,  as  a  matter  of  fact, 
be  a  mere  wanderer  and  not  an  inhabitant  or  resident  of 
any   place. ^    -In  the   legal    sense    every   one  must  have  a 

new  domicil  having  been  acquired.  Ttiis  principle  has  been  followed 
in  other  cases.  See  Kellogg  v.  Winnebago  County,  42  Wise.  97; 
Church  V.  Rowell,  49  Me.  367. 

1  State  V.  Ross,  23  N.  J.  L.  (3  Zab.)  517. 

2  Holmes  o.  Oregon  &  Cal.  Ry.  Co.,  5  Fed.  Rep.  523. 


532  STATE  JURISDICTION  IN  TAXATION.  §  417 

domicil,  which,  once   fixed,    continues  until  a  new  one  is 
acquired,  yac^o  et  nomine.^ 

§  416.  Right  to  cbange  domicil. 

It  is  a  fundamental  rule  that  the  domicil  of  an  inde- 
pendent person  is  dependent  upon  choice,  that  is,  it  is  that 
place  which  he  in  fact  and  in  intent  makes  his  domicil. 
The  right  to  make  a  domicil  different  from  that  originally 
acquired  involves  the  right  to  make  other  changes,  and  the 
removal  ma}%  of  course,  be  made  from  one  place  to 
another  in  the  same  State,  or  to  another  State  or  country. 
Whether,  in  fact,  one  claiming  to  have  effected  a  change, 
has  done  so  is  a  question  of  evidence,  and  the  burllen  of 
proof  is  upon  him. 2 

§  417.  Motive  in  change  of  domicil  immaterial. 

It  is  also  clearly  immaterial  what  was  the  motive  of  the 
party  in  making  the  change,  if  it  has  actually  been  made. 
Thus  a  man  may  change  his  domicil  from  his  city  residence 
to  one  in  the  country  or  suburbs,  in  order  to  escape  the 
biu'den  of  what  he  deems  oppressive  personal  taxation. 
This  he  has  a  right  to  do.  Thus  it  was  said  hy  the  Supreme 
Court  of  Massachusetts :  3  "  It  is  well  settled  that  a  man 
ma}'^  change  his  habitancy  or  domicil  from  one  town  to 
another,  merely  because  he  wishes  to  diminish  the  amount 
of  his  taxes.  If  he  really  intends  to  change  his  residence, 
and  does  change  it,  the  motive  which  prompts  him  to  do  so 
is  not  material." 

The  same  principle  obviously  applies  as  that  announced 

1  story  on  Conflict  of  Laws,  7th  Ed.,  §  44. 

2  Mitchell  V.  United  States,  21  Wallace  350;  Desmare  v.  United  States, 
93  U.  S.  605.  See  also  Dicey  on  Conflict  of  Laws,  Am.  Ed.,  p.  131.  The 
rule  stated  is  of  course  qualified  in  cases  of  persons  under  disabilities 
and  those  having  official  residences.  * 

3  Draper  v.  Hatfield,  124  Mass.  53. 


§    419  STATE  JURISDICTION  IN  TAXATION.  533 

by  the  Supreme  Court  in  cases  where  it  was  claimed  that 
a  man  had  changed  his  residence  for  the  purpose  of  affect- 
ing the  jurisciiction  of  the  Federal  Court.  The  sole  ques- 
tion is  whether  the  change  was  made  in  good  faith,  that 
is,  was  actually  made.  ^ 

§  418.  Term  residence    employed   in    sense   of   damicil. 

The  principle  controlling  the  determination  of  the 
question  of  change  of  domicil  was  illustrated  in  a  case  in 
the  United  States  Circuit  Court  of  Minnesota.2  Suit  was 
brought  to  recover  back  personal  property  taxes  paid  under 
protest,  on  the  ground  that  the  plaintiff  had  already 
changed  his  residence,  that  is,  his  domicil,  when  the  taxes 
were  levied.  The  plaintiff,  an  unmarried  man,  had  been 
engaged  in  business  in  a  city  of  Minnesota,  and  being  out 
of  health,  determined  to  wind  up  his  affairs  and  move  to 
New  York  where  he  intended  to  make  his  permanent 
home.  He  left  Minnesota  in  April,  1876,  and  on  the  day 
of  the  annual  assessment,  May  1st,  he  was  in  iiinere  at 
Philadelphia.  The  court  held  that  on  the  latter  date  he 
was  still  a  resident  of  Minnesota,  as  he  had  not,  in  fact, 
acquired  a  new  residence,  and  he  was  therefore  properly 
taxed  as  the  owner  of  the  personalty.  The  word  "resi- 
dent ' '  in  this  case  is  clearly  used  in  the  sense  of  one 
domiciled;  as  the  plaintiff,  under  the  facts,  had  obviously 
changed  his  residence,  but  had  not  yet  changed  his 
domicil. 3 

§  419.  Due  process  of  law  and  taxation  at  domicil. 

Due  process  of  law  limits  that  personal  taxation,  which 

1  Railway  Company  v.  Ohle,  117  U.  S.  123. 

2  McCutchen  v.  Rice  Caanty,  7  Fed.  Rep.  558. 

3  That  the  terra  "  resident  "  in  the  taxing  laws  is  used  as  the  equiv- 
alent of  *'  one  domiciled,"  see  Eidman  v.  Martinez,  184  U.  S.  578,  where 
the  court  distinguishes  between  the  law  of  the  situs  and  the  law  of  the 
domicil. 


534  STATE  JURISDICTION  IN  TAXATION.  §  419 

rests  solely  upon  the  State's  jurisdiction  over  the  person, 
to  the  place  where  that  person  is  domiciled.  No  one, 
whether  citizen  or  alien,  can  be  taxed  through  the  State's 
jurisdiction  over  his  person  except  at  the  place  of  his 
domicil. 

If  a  man  has  more  than  one  residence,  as  not  infre- 
quently happens,  a  country  and  a  city  residence,  for 
example,  located  in  the  same  or  different  States,  one  of 
these,  and  only  one,  is  his  domicil,  and  which  one  is  his 
domicil  must  be  determined  from  all  the  facts.  As  a  rule  it 
is  that  place  which  he  himself  selects.  No  Federal  question 
is  involved  in  the  decision,  m  good  faith,  of  this  question 
as  to  which  of  two  residences  is  a  man's  domicil,  or 
whether  he  has  changed  his  domicil.  But  on  the  other 
hand,  if  the  State  asserts  the  right  to  tax  by  virtue  of 
residence,  irrespective  of  domicil,  the  jurisdictional  ques- 
tion would  be  raised;  provided,  of  course,  there  is  no 
basis  for  the  tax  by  reason  of  the  presence  of  the  property 
within  the  jurisdiction. 

Thus  in  a  New  Jersey  case  already  cited  i  a  person  domi- 
ciled in  Georgia,  but  having  a  summer  residence  in  New 
Jersey,  which  he  occupied  with  his  family  for  several 
months  in  the  year,  was  held  not  subject  in  New  Jersey  to 
a  poll  tax  levied  upon  the  "inhabitants"  of  the  State, 
nor  was  he  taxable  there  upon  his  bonds  or  other  securities. 
He  was  taxable  however  upon  his  real  estate  and  his  chat- 
tels, permanently  used  or  kept  in  New  Jersey,  under  a  statute 
providing  that  all  lands  and  personal  effects  in  the  State 
must  be  taxed.  The  court  said  that  it  was  perfectly  imma- 
terial for  purposes  of  taxation,  whether  he  made  his  tem- 
porary residence  in  his  own  dwelling  with  his  domestics  and 
retinue  about  him,  or  as  a  mere  lodger  in  the  house  of  an- 
other. 

1  See  §  414, supra. 


§   420  STATE  JURISDICTION  IN  TAXATION.  535 

§  420.  Taxation  of  personal   property   situated  Avithout 
the  State  of  owner's  domicil. 

The  taxation  of  personal  propevty  according  to  its  actual 
sihis  is  so  clearly  established  in  the  different  States,  that 
practically  no  attempt  is  made  to  assert  the  j:ight  to  tax 
tangible  personal  property,  such  as  merchandise,  live  stock, 
furniture,  etc.,  at  the  domicil  of  the  owner,  when  the  prop- 
erty is  not  located  within  the  State.  The  State  statutes 
providing  for  the  taxation  of  property  "  within  the  State  " 
have  been  construed  as  meaning  property  actually  situated 
therein.  Thus  it  was  held  inNew  York  that  an  assessment  of 
a  citizen  or  one  domiciled  in  that  State,  upon  capital  invested 
in  business  in  New  Orleans,  and  farm  stock  and  household 
furniture  inNew  Jersey,  was  erroneous  under  a  statute  which 
provided  that  "  all  lands  and  all  personal  estate  within  this 
State  *  *  *  shall  be  hable  to  taxation."  1  The  court 
based  its  opinion  upon  the  language  and  purpose  of  the 
statute,  and  intimated  that  the  legislature  could  have  taxed 
the  property,  but  had  not  done  so.  In  other  words  the 
question  was  one  of  construction,  and  not  of  power. 

The  Supreme  Court  of  Missouri,  construing  the  law  of 
that  State,  in  an  opinion  notable  for  its  recognition  of  the 
principle  of  interstate  comity  in  taxation,  commented  upon 
the  injustice  of  taxing  property  in  the  State  of  the  owner's 
domicil,  which  is  properly  taxable  elsewhere ;  and  suggested 
that  the  rule  of  taxing  at  the  actual  situs  could  not  operate 
unjustly  to  Missouri,  as  the  property  of  foreign  capitalists 
in  the  State  more  than  equaled  the  property  belonging  to 
persons  domiciled  within  its  jurisdiction  located  outside  of 
the  State. 2     The  court  held  that  municipal  bonds  of  a  citi- 


1  People  ex  rel.  Hoyt  v.  Commissioners  of  Taxes,  23  N.  Y.  224. 

2  State  ex  rel.  v.  County  Court,  69  Mo.  454,  followed  in  Valle  v. 
Ziesler,  84  Mo.  214.  That  the  opinion  of  legislators,  in  the  matter  of 
interstate  comity  in  taxation,  does  not  keep  pace  with  judicial  opinion, 
is  illustrated  by  the  fact  that  the  General  Assembly  of  Missouri,  after 


536  STATE  JURISDICTION  IN  TAXATION.  §   421 

zen  of  Missouri  deposited  with  a  safe  deposit  company  in 
New  York,  were  not  taxable  in  Missouri. 

It  was  held  in  the  United  States  Circuit  Court  for  Mas- 
sachusetts,! by  Justice  Gray,  that  under  the  statutes  of 
Massachusetts  the  property  of  a  deceased  inhabitant  of 
that  State,  after  the  appointment  of  an  executor  and 
before  distribution,  was  not  taxable  in  the  State,  where  the 
property  was  not  in  the  State  and  neither  the  executor 
nor  any  person  having  an  interest  in  the  property  was 
domiciled  therein .  The  court  expressed  a  doubt  whether 
it  was  within  the  constitutional  power  of  the  State  to 
impose  such  a  tax. 

§  421.  Taxation    of   citizen  at  domicil   on  mortgages   in 
other  States. 

The  comprehensive  power  of- the  State  to  tax  the  personal 
property  of  its  citizens  was  pointedly  illustrated  in  Eart- 
land  V.  Hotchkiss,2  where  the  court  held  that  a  citizen  of 
Connecticut  was  properly  assessed  for  taxation  in  Con- 
necticut on  bonds,  owned  by  him,  which  were  executed 
in  Chicago  and  secured  by  a-  mortgage  upon  Chicago  prop- 
erty. These  bonds  were  assessed  as  part  of  his  personal 
property.     The  court  said :  — 

"It  may,  therefore,  be  regarded  as  the  established 
doctrine  of  this  court,  that  so  long  as  the  State,  by  its 
laws,  prescribing  the  mode  and  subjects  of  taxation,  does 
not  entrench  upon  the  legitimate  authority  of  the  Union, 
or  violate  any  right  recognized,  or  secured,  by  the  Consti- 

tbis  decision,  passed  an  act,  Session  Acts  of  1881,  p.  1J7,  which  is  still 
on  the  statute  books  of  the  State,  R.S.  1899,  §  9121,  specifically  subjecting 
to  taxation  in -the  State  personalty  situated  in  other  States,  so  that  all 
notes,  bonds  or  other  evidences  of  debt  held  in  any  State  or  Territory 
olhtr  than  that  in  which  the  owner  resides,  are  made  taxable,  that  is, 
the  owner  is  required  to  return  them  for  taxation. 

1  Dallinser  v.  Ripello,  14  Fed.  Rep.  32.     See  also  15  Fed.  Rep.  434. 

2  100  U.  S.  491. 


§   421  STATE  JURISDICTION  IX  TAXATION.  537 

tution  of  the  United  States,  this  court,  as  between  the 
State  and  its  citizen,  can  afford  him  no  rehef  against  State 
taxation,  however  unjust,  oppressive  or  onerous."  And 
it  added :  — 

*'The  question  does  not  seem  to  us  to  be  very  difficult  of 
solution.  The  creditor,  it  is  conceded,  is  a  permanent  resi- 
dent within  the  jurisdiction  of  the  State  imposing  the  tax. 
The  debt  is  property  in  his  hands  constituting  a  portion  of 
his  wealth,  from  which  he  is  under  the  highest  obligation, 
in  common  with  his  fellow-citizens  of  the  same  State,  to 
contribute  for  the  support  of  the  government  whose 
protection  he  enjoj's. 

"That  debt,  although  a  species  of  intangible  property, 
may,  for  purposes  of  taxation,  if  not  for  all  others,  be 
regarded  as  situated  at  the  domicil  of  the  creditor.  It  is 
none  the  less  property,  because  its  amount  and  maturity 
are  set  forth  in  a  bond.  That  bond,  wherever  actually 
held  or  deposited,  is  only  evidence  of  the  debt,  and  if 
destroj'-ed,  the  debt, — the  right  to  demand  payment  of  the 
money  loaned,  with  the  stipulated  interest — remains.  Nor 
is  the  debt,  for  the  purposes  of  taxation,  affected  by  the 
fact  that  it  is  secured  by  mortgage  upon  real  estate 
situated  in  Illinois.  The  mortgage  is  but  a  security  for 
the  debt,  and  as  held  in  State  Tax  on  Foreign-Held  Bonds 
(sr^^ra),  the  right  of  the  creditor  to  proceed  against  the 
property  mortgaged,  upon  a  «  given  contingency,  to  enforce 
by  its  sale  the  payment  of  his  demands  *  *  *  has  no 
locality  independent  of  the  party  in  whom  it  resides.  It 
-may  undoubtedly  be  taxed  by  the  State  when  held  by  a 
resident  therein,'  etc.  The  debt,  then,  having  its  sifns  at 
the  creditor's  residence,  both  he  and  it  are,  for  the  pur- 
poses of  taxation,  within  the  jurisdiction  of  the  State.  It 
is,  consequently,  for  the  State  to  determine,  consistently 
with  its  own  fundamental  law,  whctlier  such  property 
owned  by  one  of  its  residents  shall  contribute,  by  way  of 


538  STATE  JURISDICTION  IN  TAXATION.  §   422 

taxation,  to  maintain  its  government.  Its  discretion  in 
that  regard  cannot  be  supervised  or  controlled  by  any  de- 
partment of  the  Federal  government,  for  the  reason,  too 
obvious  to  require  argument  in  its  support,  that  such  taxa- 
tion violates  no  principle  of  the  Federal  Constitution. 
Manifestly  it  does  not,  as  is  supposed  b}'^  counsel,  interfere 
in  any  true  sense  with  the  exercise  by  Congress  of  the 
power  to  regulate  commerce  among  the  several  States. 
Nor  does  it,  as  is  further  supposed,  abridge  the  privileges 
or  immunities  of  citizens  of  the  United  States,  or  deprive 
the  citizen  of  life,  liberty,  or  property  without  due  process 
of  law,  or  violate  the  constitutional  guaranty  that  the  citi- 
zens of  each  State  shall  be  entitled  to  all  pri\dleges  of 
citizens  in  the  several  States. 

« '  Whether  the  State  of  Connecticut  shall  measure  the 
contribution  which  persons  resident  within  its  jurisdiction 
shall  make  by  way  of  taxes,  in  return  for  the  protection  it 
affords  them,  by  the  A^alue  of  the  credits,  choses  in  action, 
bonds,  or  stocks  which  they  may  own  (other  than  such  as 
are  exempted  or  protected  from  taxation  under  the  Consti- 
stution  and  laws  of  the  United  States),  is  a  matter  which 
concerns  only  the  people  of  that  State,  with  which  the 
Federal  Government  cannot  rightly  interfere."! 

§  422.  State  may  tax  resident  stockholder  in  foreign  cor- 
poration upon  value  of  stock. 

While  a  State  has  the  power  to  tax  all  shares  of  stock 
in  corporations  of  its  own  creation,  supra,  §  403,  the  State 
where  the  stockholder  resides  may  also  require  him  to  list 
the  same  stock  as  part  of  his  personal  property.  Per- 
sonal property  may  acquire  an  independent  situs  for  tax- 

1  For  an  interesting  and  vigorous  discussion  of  this  case  from  an 
economic  point  of  view,  see  David  A.  Wells'  "Theory  and  Practice  of 
Taxation,"  p.  492  et  seq.  For  application  of  the  rule  established  in  this 
case  to  Federal  taxation,  see  infra,  §  514. 


§   422  STATE  JURISDICTION  IN  TAXATION.  539 

ation  ill  the  jurisdiction  wliere  actually  located,  but  this 
does  not  affect  the  jurisdiction  of  the  State  to  tax  the  same 
property  through  the  person  of  its  owner.  Thus,  in  a  re- 
cent case  in  Michigan,!  the  court  said  that  the  question 
whether  the  capital  stock  of  a  foreign  corporation  is  taxed 
in  the  State  of  the  corporation's  domicil  is  immaterial, 
since  the  shares  of  such  capital  stock  in  the  hands  of  resi- 
dents acquired  a  silus  in  Michigan  for  the  purjioses  of  tax- 
ation, and  the  law  was  not  framed  with  reference  to  what 
other  States  might  do.  It  was  said  by  the  Supreme  Court 
of  Ohio:2_ 

"  The  constitutional  power  to  tax  shares  of  stock,  owned 
by  our  citizens  in  corporations  located  without  the  State, 
does  not  depend  on  whether  the  capital  of  the  corporation 
is  or  is  not  taxed  in  the  State  where  the  corporation  is 
created.  The  power  is  the  same,  whether  the  capital  of 
the  corporation  is  there  taxed  or  not;  otherwise,  the  power 
of  taxation  conferred  by  the  Constitution  would  be  made  to 
depend  upon  the  operation  of  laws  of  foreign  jurisdic- 
tions—  a  proposition  so  obviously  ill  founded  that  the 
moment  it  is  stated  its  falsity  becomes  apparent. "^ 

The  same  ruling  was  made  in  Rhode  Island,  where  stock 
in  a  manufacturing  company  of  Massachusetts,  which  was 
taxed  at  the  domicil  of  the  corporation,  was  held  taxable 
at  the  domicil  of  the  owner  in  Rhode  Island,  the  court 
saying :  ^  — 

1  Bacon  v.  Board  of  State  Tax  Commissioners,  85  N.  W.  Rep.  307. 

2  Br.id'.ey  v.  Bander,  36  Ohio  St.  28;  see  also  Lee  v.  Sturges,  40  Ohio 
153  and  2  L.  R   A.  556. 

s  Citing  Dwight  V,  Mayor,  etc.,  12  Allen  (Mass.)  316. 

^  Dyer  v.  Osborne,  11  R.  I.  321.  The  same  ruling  was  made  in  Mis- 
souri, Ogden  V.  City  of  St.  Joseph,  90  Mo.  522,  where  the  court  construed 
the  statute  taxing  property  as  including  shares  of  stoclj  in  a  foreign 
corporation.  See  also  Seward  v.  City  of  Rising  Sun,  79  lud.  351 ;  Bacon 
V.  Tax  Commissioners  (Mich.),  85  N.  W.  Rep.  307;  McKeen  v.  County  of 
Northampton,  49  Pa.  St.  519. 


540  STATE  JURISDICTIOX  IX  TAXATION.  §   422 

"The  laws  of  Ebocle  Island  are  paramount  in  Rhode 
Island,  and  all  the  inhabitants  of  the  State  are  subject  tr» 
them  without  regard  to  the  laws  of  any  other  State.  If 
there  be  any  ground  upon  which  the  defendant  is  entitled 
to  exoneration  because  of  the  Massachusetts  tax,  it  is  that 
clause  of  our  Constitution  which  declares  that  '  the  burdens 
of  the  State  ought  to  be  fairly  distributed  among  its  citi- 
zens ;  '  and  upon  the  claim  that  it  is  unfair  to  tax  him  in 
Ehode  Island  for  property  on  which  he  has  paid  a  tax  in 
Massachusetts.  We  do  not  think,  however,  that  the  tax 
ouo-ht  to  be  declared  void  under  that  clause  of  the  consti- 
tution.  It  would  certainly  be  going  too  far  to  hold  that  a 
man  of  wealth,  living  in  Rhode  Island,  cannot  be  taxed  at 
all  in  Rhode  Island,  if  his  property  is  all  invested  in  the 
stocks  of  a  manufacturing  corporation  of  another  State, 
and  there  subject  to  taxation.  And  if  such  a  man  can  be' 
taxed  at  all  in  Rhode  Island,  the  question  of  how  much, 
is,  within  reasonable  limits  at  least,  a  legislative,  not  a 
judicial  question." 

The  Ohio  statute  referred  to  above  was  also  construed 
and  enforced  by  the  Supreme  Court  in  a  case  from  the 
United  States  Circuit  Court  in  Ohio  ^  where  the  court  fol- 
lowed the  decision  of  the  Supreme  Court  of  that  State, 
above  quoted,  and  held  that  an  assessment  under  the 
statute  upon  a  citizen  of  Ohio  on  stock  of  the  Western 
Union  Telegraph  Company,  a  non-resident  corporation, 
was  valid,  although  the  corporation  paid  taxes  in  Ohio  on 
its  property  in  that  State.  It  was  necessary  for  the  com- 
plainant to  show  that  his  stock  was  exempted  under  the 
laws  of  Ohio.  The  court  followed  the  State  court  in  say- 
ing that  the  exemption  in  the  statute  only  apphed  to  shares 
of  corporations  which  were  required  to  return  substantially 
aU  their  capital  and  property  in  the  State  for    taxation, 

1  Sturges  V.  Carter,  114  U.  S.  511. 


§  423  STATE  JURISDICTION  IN  TAXATION.  541 

and,  as  the  property  of  the  Western  Union  assessed  in  the 
State  was  but  a  small  part  of  all  its  property,  therefore  the 
defendant  was  not  entitled  to  the  exemption  of  his  stock. 
IS^o  Federal  question,  apparently,  was  raised  in  this  case, 
the  whole  controversy  turning  upon  the  construction  of  the 
Ohio  statute. 

§  423.   No  immunity  under  Federal  Constitution  of  State 
securities  from  taxation  in  other  States. 

The  State  of  Maryland  included  in  the  tax  list  of  a  resi- 
dent of  Baltimore  certain  securities  of  the  registered  public 
debt  of  the  State  and  city  of  New  York  and  other  States, 
some  of  which  were  exempt  from  taxation  in  the  State 
where  issued  and  some  actually  taxed  there.  It  was 
argued  that  the  same  property  could  not  have  at  the  same 
time  more  than  one  situs  for  taxation,  and  that  the  situs  of 
this  was  in  the  State  owing  the  debt.  But  the  court  heldl 
that  it  was  immaterial  whether  the  debt  was  taxed  in  the 
debtor  State  or  not,  and  that  there  was  no  immunity  from 
taxation  in  Maryland  under  Article  IV,  Section  1  of  the 
Constitution,  providing  that  full  faith  should  be  given  in 
each  State  to  the  public  acts  of  every  other  State.  No 
State  can  legislate  with  reference  to  taxation  in  other  juris- 
dictions or  exempt  from  taxation  property  beyond  its  con- 
fines. The  debt  still  remained  a  chose  in  action  with  all 
the  incidents  which  appertain  to  that  species  of  property. 
The  court  said  at  page  595  :  — 

"It  is  true,  if  a  State  could  protect  its  securities  from 
taxation  everywhere,  it  might  succeed  in  borrowing  money 
at  reduced  interest;  but,  inasmuch  as  it  cannot  secure  such 
exemption  outside  of  its  own  jurisdiction,  it  is  compelled 
to  go  into  the  market  as  a  borrower,  subject  to  the  same 
disabilities    in   this  particular  as  individuals.     While  the 

1  Bonaparte  v.  Tax  Court,  104  U.  S    592. 


542  STATE  JURISDICTIOX  IN  TAXATION.  §   424 

Constitution  of  the  United  States  might  have  been  so 
framed  as  to  afford  relief  against  such  a  disabihty,  it  has 
not  been,  and  the  States  are  left  free  to  extend  the  comity 
which  is  sought,  or  not,  as  they  please. 

"  Taxation  of  the  debt  within  the  debtor  State  does  not 
change  the  legal  situs  of  the  debt  for  any  other  purpose 
than  that  of  the  tax  which  is  imposed.  Neither  does 
exemption  from  taxation." 

§  424.  Domicil  and  location,  as  situs  for  taxation,  in  same 
States. 

The  question  of  the  situs  for  taxation  of  intangible  per- 
sonal property,  such  as  bonds,  notes,  credits,  etc.,  has 
been  frequently  presented  to  the  State  courts,  not  only 
with  reference  to  the  taxability  of  the  property  within  the 
State,  but  also  as  to  the  place  of  taxation  therein,  where 
the  owner  is  domiciled  in  one  place  and  the  property  is 
localized  elsewhere  in  the  same  State,  e.  ^.,  securities  in 
the  hands  of  a  local  agent  or  the  like.  The  taxable  situs 
of  such  property  may  be  and  usually  is  regulated  by  stat- 
ute of  the  State,  but  in  the  absence  of  express  statute, 
personal  property  in  the  same  State  is  usually  held  to  be 
taxable  at  the  domicil  of  the  owner. i  The  Supreme  Court 
of  Alabama  arrived  at  the  same  conclusion,'-^  in  deciding  a 


1  The  New  York  Court  of  Appeals,  construing  the  statute  of  that 
State  and  holding  that  the  residence  of  the  owner  and  not  that  of  the 
agent,  both  of  which  were  in  New  York,  was  the  taxable  sitiis  of  securi- 
ties, said:  "A  person  living  in  a  city  where  taxation  was  onerous, 
would  escape  the  burden  by  placing  his  assets  in  the  hands  of  an  agent 
in  an  outlying  town,  while  the  countryman  whose  property  might,  at  the 
time  of  the  assessment,  be  in  the  hands  of  his  factor,  broker  or  commis- 
sion agent  for  use  or  investment  would  find  it  enlarged  by  city  valua- 
tions, only  to  be  diminished  by  taxes  from  which  he  could  derive  no 
benefit."     Boardman  v.  County  Supervisors,  85  N.  Y.  359,  p.  363. 

2  Boyd  V.  Selma,  16  L.  E.  A.  729,  1.  c.  page  732.  This  case  contains 
a  review  of  the  authorities  supporting  the  view  that  such  property  should 
be  taxed  at  the  domicil  of  the  creditor. 


§  425  STATE  JURISDICTION  IN  TAXATION.  543 

case  where  the  domicil  and  the  property  were  in  different 
cities  of  the  State,  saying:  — 

"  Passing  to  the  question  whether  negotiable  promissory 
notes  are  taxable  at  the  domicil  of  the  owner,  or  whether 
the  situs  of  such  property,  and  not  the  domicil  of  the 
owner,  determines  the  liability  to  taxation,  we  find  irrecon- 
cilable confusion  in  the  adjudicated  cases,  as  well  as  differ- 
ences in  the  statement  of  the  doctrine  in  the  text-books. 
Much  of  this  confusion  results  from  a  failure  to  observe 
the  varying  phraseology  of  the  different  statutes  giving 
rise  to  the  decisions,  but  in  some  instances  the  authori- 
ties differ  in  the  statement  of  the  general  principle 
involved." 

§  425.  Double  taxation  not  presumed. 

While  it  is  not  practicable  to  formulate  a  rule,  where  the 
cases  depend  upon  the  construction  of  different  State  stat- 
utes and  involve  their  phraseology,  both  as  to  what  shall 
constitute  taxable  property  in  the  State  and  as  to  the  place 
in  the  State  where  the  personalty  shall  be  assessed,  it  has 
been  frequently  held  that  where  bonds,  notes  and  mort- 
gages have  had  an  independent  situs  given  them  in  another 
State  and  have  been  localized  there  through  a  resident  agent, 
or  otherwise,  so  as  to  become  subject  to  the  taxing  power 
of  that  State,  they  were  not  subject  to  taxation  in  the  State  ~^ 
of  the  domicil,  unless  expressly  made  so  by  statute.  In  \ 
other  words,  it  is  a  rule  of  construction,  repeatedly  recog- 
nized by  the  courts  in  taxation  cases,  that  double  taxation 
will  not  be  presumed  to  have  been  intended,  and  will  only 
be  enforced  under  express  mandate. i  This  is  only  men- 
tioned as  illustrative  of  the  complications  attending  the 
attempt  to  reach  this  class  of  property,  that  is,  notes,  bonds 
and   mortgages,    for   assessment.     Though  often  liable  to 

1  Sees?tpm,  §402,  §405. 


544  STATE  JURISDICTION  IN  TAXATION.  §   426 

double  taxation  by  the  conflictiug  sovereign  claims  of  the 
State  of  domicil  and  the  State  of  location,  a  fact  to  which 
we  find  frequent  reference  in  the  decisions  of  the  court, 
such  property  is  rarely  reached  for  taxation  in  any  juris- 
diction. These  decisions  are  based  upon  statutory  con- 
struction and  no  principle  of  due  process  of  law  is  involved 
therein.! 

It  has  already  been  shown  that  a  State  may  tax  the 
shares  of  non-resident  stockholders  in  its  domestic  corpo- 
rations, enforcing  payment  through  its  control  over  the 
company ;  and  may  also  tax  the  resident  stockholders  in 
foreign  corporations  upon  the  value  of  the  stock  held  by 
them,  regardless  of  the  fact  that  the  capital  of  the  company 
or  the  property  in  which  it  is  invested  is  taxed  in  other 
jurisdictions. 

§  426.  Due  process  of  la\tr  and  double  taxation. 

Double  or  duplicate  taxation  may  be  enforced  by  a  State 
or  may  result  from  the  operation  of  the  tax  laws  of  a  State 

1  Thus  corporate  shares  of  domestic  corporations  are  as  a  rule  held 
not  taxable  where  the  corporate  property  is  taxed  to  the  corporation, 
this  being  an  obvious  form  of  double  taxation,  which  the  courts  say  is 
not  presumed.  Thus  in  Lewiston  Water  &  Power  Co.  v.  Asotin  Co.,  24 
Wash.  371,  the  court  said  that  such  double  taxation  was  illegal  in  the 
absence  of  special  legislative  authorization,  although  double  taxation 
was  not  expressly  prohibited  by  the  Constitution.  See  also  to  the  same 
effect.  People  ex  rel.  v.  Badlara,  ,57  Cal.  594. 

In  Citizens'  Street  Ry.  Co.  v.  Common  Council,  125  Mich.  673,  the 
court  held,  although  there  was  no  express  constitutional  prohibition 
against  double  taxation,  that  an  act  for  assessing  corporate  property  by 
deducting  the  value  of  real  estate  from  the  market  value  of  the  stock, 
and  the  indebtedness  from  the  cash  value  of  the  persoual  property,  and 
assessing  as  personalty  the  balance  so  found,  was  void.  The  court  said 
that  this  would  be  double  taxation,  because  if  the  company  had  no  debts 
or  real  estate,  all  of  the  property  would  be  taxed  twice  as  personal  estate. 
In  People  v.  Coleman,  135  N.  Y.  231,  the  court  in  speaking  of  double 
taxation,  said:  "  if  that  had  been  attempted,  some  way  would  have  been 
found  to  defeat  it,  as  that  would  be  against  public  policy,  the  purpose  of 


§   427  STATE  JURISDICTION  IN  TAXATION.  545 

without  violating  the  constitutional  guaranty  of  due  process 
of  law.  It  has  been  repeatedly  recognized  that  duplicate 
taxjition,  to  a  certain  extent,  cannot  be  avoided  in  State  tax 
systems.  Thus  nvdv  be  taxed  both  property  and  tho  money 
that  is  paid  for  the  property ;  land  and  the  mortgage  upon 
the  land ;  property  and  the  income  from  the  property ; 
the  capital  invested  in  a  business  and  the  privilege  of 
conducting  the  business;  capital  stock  of  a  corporation, 
the  property  in  which  the  capital  is  invested,  and  the 
shares  in  the  hands  of  the  holders.  Some  of  these 
cases  of  double  taxation  are  usually  avoided  by  statute  or 
custom.  Thus  the  holders  of  shares  of  stock  and  the  capital 
stock  in  domestic  corporations  are  usually  exempted 
from  taxation,  where  the  corporate  property  is  taxed. i  In 
some  States  mortgages  are  not  taxed  where  the  property 
mortgaged  is  taxed.  But  assuming  that  there  is  no  dis- 
crimination  as  between  taxpayers  in  the  same  class,  the 
power  of  the  State  to  tax  twice  is  said  to  be  the  same  as 
the  power  to  tax  once,  that  is,  no  constitutional  question 
is  raised  by  the  exercise  of  that  power.  Double  taxation 
does  not  necessarily  consist  in  assessing  the  same  prop- 
erty twice  to  the  same  person,  but  may  consist  in  requiring 
a  double  contribution  to  the  same  tax  on  account  of  the 
same  property,  though  the  assessments  are  to  different  per- 
sons.2 

§  427.  Double  taxation  from  competing  State  authorities. 

While  some  forms  of  double  taxation,  particularly  in  the 
case  of  corporations,  are  avoided  where  the  taxes  are  levied 

the  laws  and  natural  justice."  See  also  State  w.  Thomas,  2G  N.  J.  L.  181. 
But  see  contra  as  to  double  taxation  of  corporate  property  and  stock, 
City  of  Memphis  v.  Ensley,  6  Baxter  (Tenu.)  553. 

1  See  cases  supra,  §  425. 

2  Gerraania  Trust  Co.  v.  San  Frajicisco,  128  Cal.  589;  see  also  Estate 
of  Fair,  128  Cal.  607. 


546  STATE  JrPJSDICTION  IN  TAXATION.  §   428 

in  the  same  State,  there  is  another  form  of  double  taxation, 
akeady  referred  to,  which  results  from  the  subjection  of 
the  same  property  to  the  taxing  power  of  two  jurisdictions, 
as  in  the  case  where  the  owner  of  property  is  domiciled  in 
one  State,  and  the  property  located  in  another;  or  where 
the  paper  evidence  of  property  is  in  one  State  and  the 
property  itself  in  another.  _  This  is  illustrated  in  the  Cali- 
fornia cases  cited,  double  taxation  being  prohibited  in  that 
State.  While  railroad  mortgage  bonds,  secured  by  prop- 
erty in  California,  were  exempt  from  taxation,  similar 
bonds  of  a  railroad  corporation,  secured  by  property  in  an- 
other State,  which  property  was  presumably  there  taxed, 
were  held  taxable  in  California. 

It  was  said  by  one  of  our  most  eminent  economic  au- 
thorities on  taxation :  i — 

"  It  need  not  be  pointed  out,  that  amid  the  complexities 
of  modern  industrial  life  equality  of  taxation  cannot  be  at- 
tained without  a  careful  consideration  of  these  problems. 
To-day  a  man  may  live  in  one  State,  may  own  propert}'^  in 
a  second  and  may  carry  on  business  in  a  third.  He  may 
die  in  one  place  and  leave  all  his  property  in  another.  He 
may  spend  all  his  income  in  one  town  and  may  derive  that 
income  from  property  or  business  in  another  town.  He 
may  carry  on  business  in  several  States,  or  if  he  has  in- 
vested in  corporate  securities,  the  corporation  may  be  the 
creature  of  another  State,  and  be  situated  or  do  busi- 
ness in  a  third.  All  these  cases  may  affect  foreign  States 
or  separate  commonwealths  of  the  same  Federal  State,  or 
separate  cities  or  counties  of  the  same  commonwealth. 
The  possible  entanglements  are  well-nigh  innumerable." 

§  428.  Interstate  comity  essential    to  avoid  double   tax- 
ation. 

These  problems  however  must  find  their  solution  in  the 
1  Seligman's  Essays  on  Taxation,  p.  107. 


§  428  STATE  JURISDICTION  IX  TAXATION.  547 

elevation  of  public  opinion  bringing  about  a  recognition  of 
interstate  comity  in  taxation  for  which  the  courts  have  fre- 
quently appealed,  but  which  they  are  powerless  to  effect. 

The  Supreme  Court  has  said,  by  Justice  Miller, i  that 
they  knew  of  no  provision  of  the  Federal  Constitution 
which  forbids  a  State  from  taxing  the  same  property  twice 
for  the  same  purpose.  It  seems  that  the  States  can  be 
restrained  from  avowedly  taxing  property  beyond  their 
jurisdiction,  for  example  that  of  interstate  carriers  under 
the  unit  and  mileage  rules.  But  they  cannot  be  restrained 
from  taxing  persons  and  property  within  their  jurisdic- 
tion irrespective  of  the  action  of  other  State  sovereignties 
upon  -the  same  property.  In  other  words,  the  complica- 
tions growing  out  of  the  fact,  that  the  property  may  exist 
in  one  State  and  the  paper  representing  it  in  another,  may 
involve  a  form  of  double  taxation  by  competing  State 
sovereignties,  in  which  they  cannot  be  restrained  under  the 
operation  of  the  Fourteenth  Amendment. 2 

1  Davidson  v.  New  Orleans,  96  U.  S.  97,  1.  c.  p.  106. 

2  This  subject  was  carefully  considered  by  the  recent  National  Con- 
ference on  Tax  ition,  held  at  BuEfxlo,  New  York,  May  23,  1901,  under  the 
auspices  of  the  National  Civic  Federation,  attended  by  representatives, 
both  economists  and  men  of  large  practical  experience  in  taxation,  ap- 
pointed by  the  governors  of  some  thirty  States.  The  Conference  unani- 
mously adopted  the  following  resolution,  after  full  discussion,  as 
expressive  of  its  views : — 

«'  Whereas,  Modern  industry  has  overstepped  the  bounds  of  any  one 
State,  and  commercial  interests  are  no  longer  confined  to  merely  local 
interests;  and 

"  Whereas,  The  problem  of  just  taxation  cannot  be  solved  without 
considering  the  mutual  relations  of  contiguous  States;  belt 

"  Resolved,  That  this  Conference  recommend  to  the  States  the  recog- 
nition and  enforcement  of  the  principles  of  interstate  comity  in  taxa- 
tion. These  principles  require  that  the  same  property  should  not  be 
taxed  at  the  same  time  by  two  State  jurisdictions,  and  to  this  end  that 
if  the  title  deeds  or  other  paper  evidences  of  the  ownership  of  property, 
or  of  an  interest  in  property  are  taxed,  they  shall  be  taxed  at  the  situs  of 
the  property,  and  not  elsewhere.    These  principles  should  also  be  ap- 


548  STATE  JURISDICTION  IN  TAXATION.  §   429 

§  429.  Duplicate  inheritance  taxation. 

The  duplicate  taxation  of  inheritances,  that  is  by  both 
Federal  and  State  governments,  was  a  necessary  result  of 
two  sovereignties  having  jurisdiction  in  the  same  territory 
exercising  their  taxing  power  upon  the  same  subject.  This 
has  now  been  removed  by  the  repeal  of  war  taxes  levied 
under  the  act  of  1898. 

There  is  however  double  taxation  of  inheritances  in 
another  form,  where  the  decedent  domiciled  in  one  State 
at  his  death  owns  personal  property  in  other  States,  which 
is  subject  to  the  latter's  taxing  laws.  Thus  a  State  may 
impose  a  tax  not  only  upon  the  inheritance  by  will,  or  its 
own  intestate  laws,  of  the  property  of  decedents  domiciled 
therein,  but  may  also  impose  a  tax  upon  the  property  lo- 
cated in  its  territory  which  passes  under  the  inheritance  laws 
of  any  other  State.  Thus  the  decedent  may  have  been  dom- 
iciled in  one  State,  his  personal  property  may  be  located 
in  another  State  or  in  a  foreign  country,  while  the  heir  or 
legatee  may  live  in  a  third  jurisdiction.  Thus  in  New  York 
the  courts  have  enforced  the  inheritance  tax  of  that  State 
against  the  money  on  deposit  in  a  New  York  bank  belong- 
ing to  a  citizen  of  Pennsylvania.  The  court  said^  that 
"the  case  is  one  of  some  hardship,  for  the  reason  that  the 
whole  estate  of  the  decedent  is  taxable  in  Pennsylvania, 
and,  if  the  property  referred  to  is  taxable  here,  the  right  of 
succession  to  it  will  cost  10  per  cent  of  its  value.  *  *  * 
It  is  unfortunate  that  the  laws  of  the  different  States 
relating  to  succession  taxes  are  not  uniform  and  framed  to 
prevent  double  taxation." 

In  another  case  the  same  principle  was  extended  by  the 
New  York  Court  of  Appeals  to  bonds  of  a  foreign  corpora- 
plied  to  any  tax  upon  the  transfer  of  property  in  expectation  of  death, 
or  by  will,  or  under  the  laws  regulating  the  distributioa  of  property  in 
case  of  intestacy." 

1  In  re  Burr's  Estate,  38  N.  Y.  Supp.  811,  and  cases  cited  in  the 
opinion. 


§   429  STATE  JURISDICTION  IX  TAXATION.  549 

tion  and  bonds  and  certificates  of  stock  of  domestic  cor- 
porations, owned  by  a  non-resident  decedent  but  deposited 
in  a  safe  deposit  vault  within  the  State.  United  States 
bonds  however  were  held  not  to  be  included  in  the  words 
of  the  statute.  The  court  said  the  legislature  intended  to 
repeal  the  maxim  mohilia  personam  sequunlur  so  far  as  it 
was  an  obstacle,  and  to  leave  it  unchanged,  so  far  as  it  was 
an  aid,  to  the  imposition  of  a  transfer  tax  upon  all  prop- 
erty in  an}^  respect  subject  to  the  laws  of  that  State. i 

Under  the  same  statute  the  shares  of  the  capital  stock  of 
a  domestic  corporation,  though  the  certificates  were  in  an- 
other State  in  the  possession  of  a  non-resident  decedent  at 
the  time  of  his  death  were  declared  "  property  within  the 
State,"  while  bonds  of  a  like  corporation  held  in  like 
manner 2  were  not  included  in  the  designation  "property 
within  the  State." 

On  the  other  hand,  in  New  York  personal  property 
of  a  resident  decedent,  wheresoever  situated,  whether 
within  or  without  the  State,  was  held  subject  to  the  in- 
heritance tax, 3  as  this  was  imposed  on  the  right  of  suc- 
cession, which  was  based  on  the  enabling  legislation  of  the 
State . 


1  In  re  Whiting's  Estate,  150  N.  Y.  27,  and  34  L.  R.  A.  232;  see  also 
Hondayer's  Estate,  150  N.  Y.  37,  and  34  L.  R.  A.  235. 

2  In  re  Bronson,  150  N.  Y.  1,  and  34  L.  R.  A.  238. 

3  In  re  Estate  of  Swift,  137  N.  Y.  77,  and  18  L.  R,  A.  709. 

In  Orcutt's  Appeal,  97  Pa.  179,  the  Pennsylvania  statute  was  con- 
strued as  including  only  personal  property  of  a  tangible  nature  actually 
situated  or  used  for  business  purposes  within  the  State.  But  in  a 
later  case,  In  re  Lewis's  Estate,  52  Alt.  Rep.  205,  it  was  held  that  the 
iniangible  personalty  of  a  non-resident  decedent  was  subject  to  the 
collateral  inheritance  tax  within  the  State,  where  the  executor  having 
taken  out  ancillary  letters  elects  to  have  full  distribution  of  the  fund 
made  there  and  this  is  acquiesced  in  by  the  legatees.  The  court  said 
the  same  result  would  follow  where  property  was  in  possession  and 
control  of  a  resident  agent  with  power  of  investment  and  reinvestment. 
For  collection  of  cases  both  English  and  American  on  the    subject  of 


550  STATE  JURISDICTION  IN  TAXATION.  §   431 

§  430.  Question  one  of  construction  and  not  of  legisla- 
tive pow^r. 

It  is  clear  therefore  that  this  question  of  duplicate 
taxation  under  inheritance  tax  hiws  is  one  of  the  intent 
of  the  leo^islature  as  shown  in  the  construction  of  the 
statute,  and  not  a  question  of  the  power  of  the  State. 
As  the  right  of  inheritance  either  in  the  case  of  wills  or 
intestacy  is  dependent  upon  the  statute,  the  State  can 
impose  conditions  upon  the  enjoyment  of  this  right  wher- 
ever the  personal  property  is  located.  On  the  other  hand, 
the  State  has  the  power  to  tax,  whether  in  property  or. 
inheritance  taxation,  the  property  localized  within  its  juris- 
diction. The  cases  in  the  State  courts  upon  this  matter 
of  duplicate  taxation  are  all  dealt  with  upon  the  question 
of  construction  and  not  of  power. 

This  distinction  is  clearly  illustrated  by  the  recent 
decision  of  the  Supreme  Court  in  construing  the  inherit- 
ance tax  law  enacted  by  Congress  in  1898,  as  not  including 
the  personalty  in  this  country  passing  under  will  or  intes- 
tacy of  parties  domiciled  abroad.  While  it  was  within 
the  power  of  Congress  to  tax  the  succession  in  such  cases, 
it  had  not  done  so.i 

§  431.  Due  process  of  law  in   taxation  requires  legisla- 
tive authority. 

Due  process  of  law  in  taxation  requires  not  crnly  that  a 
tax  must  be  levied  for  a  public  purpose  appertaining  to  the 
district  taxed,  and  upon  property,  business  or  persons 
within  the  lawful  jurisdiction  of  the  State,  but  also  that 
the  taxing  power  be  exercised  by  the  legislative  authority 
of  the  State.     The  power  of  taxation  is  a  sovereign  power 

resident  and  non-resident  decedents  in  inheritance  taxation,  see  Dos 
Passes  on  Inheritance  Tax  Law,  2d  Ed.,  §  47. 
1  Eidman  v.  Martinez,  ISi  U.  S.  578. 


§   43 X  STATE  JURISDICTION  IN  TAXATION.  551 

exercised  by  the  legislative  authority  of  the  government, 
and  taxes  can  only  be  collected  when  the  property  has  been 
assessed  and  taxes  collected  in  the  mode  specifically  pre- 
scribed by  law.  The  subjects  of  taxation  under  constitu- 
tional limitations,  Federal  and  State,  are  to  be  selected 
by  the  legislative  discretion  and  the  taxes  levied  under  a 
definite  rule  of  apportionment,  with  provision  for  valuation 
and  hearing  where  taxes  are  upon  value.  The  failure  of 
the  legislature  to  exercise  this  authority  cannot  be  supplied 
by  executive  oflicers,  or  by  the  courts.  This  sovereign 
legislative  power  of  taxation  cannot  be  delegated,  except  to 
the  municipal  subdivisions  of  the  State. 

This  fundamental  canon  of  taxation  was  forcibly  illus- 
trated in  the  recent  decision  of  the  Supreme  Court  of  In- 
diana, holding  that  life  insurance  policies,  although 
"  property  "  within  the  State  and  therefore  subject  to  the 
taxing  power  of  the  State,  had  not  been  subjected  to  taxa- 
tion by  the  General  Assembly. i  The  State  constitution 
provided  that  "  all  property  within  the  jurisdiction  of  the 
State,  not  expressly  exempted,  should  be  subject  to  taxa- 
tion; "  and  it  also  provided  that  "  the  General  Assembly 
shall  *  *  *  prescribe  such  regulations  as  shall  secure  a 
just  valuation  for  taxation  of  all  property,  both  real  and  per- 
sonal, excepting  such  only  for  municipal  *  *  *  etc. 
*  *  *  purposes,  as  may  be  specially  exempted  by 
law."  The  statute  specifically  prescribed  what  "  personal 
property"  should  include,  mentioning  different  classes; 
and  also  provided  what  should  be  included  in  the  schedule  re- 
quired to  be  filed  by  the  taxpayer,  life  insurance  policies  not 
being  mentioned  in  either  enumeration,  although  the  latter 
contained  in  the  concluding  clause,  "  all  other  goods,  chat- 
tels and  personal  property,  not  heretofore  specifically  men- 
tioned, and  their  value,  except  property  specifically  exempt 

1  State  Board  of  Tax  Commissioners  v.  Hoiliday,  150  lad.  216,  two  of 
the  five  judges  dissenting. 


552  STATE  JURISDICTION  IN  TAXATION.  §   431 

from  taxation."  The  State  Board  of  Tax  Commissioners 
had  directed  the  local  assessor  to  include  life  insm^ance 
policies,  and  furnished  directions  for  their  valuation.  The 
State  Court  held  that  this  was  unauthorized  and  illegtil,  and 
the  collection  of  the  tax  was  enjoiued. 

In  this  case,  and  in  other  cases  i  under  similar  provisions 
in  State  constitutions,  the  mandate  of  the  constitution  is 
addressed  to  the  legislative  discretion  and  necessarily  re- 
quires legislative  action  in  the  selection  of  the  subjects  of 
taxation.  Thus  the  court- said  in  this  case:  "  It  is,  there- 
fore, a  legislative  power  to  select  the  subjects  for  taxation, 
and  this  constitutional  provision  imposes  the  duty  and 
limitation  upon  the  legislature  of  providing  by  law  regu- 
lations or  methods  for  a  just  valuation  of  all  property, 
both  real  and  personal,  for  taxation.  Where  the  legisla- 
ture has  not  exercised  this  power,  no  other  department  of 
the  State  government  can  supply  the  omission,  and  where 
no  such  regulation  has  been  prescribed  by  law  as  to  any 
particular  species  of  property,  then  such  property  cannot 
be  taxed.  This  conclusion  may  rest  either  on  the  infer- 
ence from  such  failure  to  prescribe  such  regulations  that 
the  legislature  did  not  intend  to  select  that  particular 
species  of  property  as  a  subject  of  taxation,  or,  regardless 
of  the  legislative  intent,  the  failure  to  prescribe  such  regu- 
lations leaves  such  property  unselected  as  a  subject  of 
taxation." 


1  Riley  w.  "Western  Uaion  Tel.  Co.,  47  lad.  511;  County  of  Brie  w. 
City  of  Erie,  113  Pa.  St.  360;  Louisiana  Co.  v.  New  Orleans,  31  La.  Ann. 
440;  Mississippi  Mills  v.  Cook,  56  Miss.  40;  Maguire  v.  Board  of  C  )m- 
missioners,  71  Ala.  401;  Stratton  v.  Collins,  43  N.J.  L.  562.  In  Loan 
and  Homestead  Association  v.  Keith,  153111.  609,  an  act  declaring  stocks 
and  notes  of  Homestead  and  Loan  Association  not  subject  to  taxation 
was  held  to  be  unconstitutional  as  an  exemption  prohibited  by  the  con- 
stitution. As  to  the  legislative  power  in  the  absence  of  constitutional 
restriction,  see  the  exhaustive  opinion  in  Wisconsin  Central  R.  R.  Co. 
V.  Taylor  Co.,  52  Wise.  37. 


§432  STATE  JURISDICTION  IN  TAXATION.  553 

The  legislative  power  of  taxation  is  inherent,  and  the 
State  constitution  is  only  operative  as  a  restraint,  not  as  a 
grant  of  power.  It  is  in  this  respect  distinguished  from 
the  taxing  power  of  Congress,  which,  as  hereafter  shown, 
is  based  upon  the  grant  of  the  United  States  Constitution. 
The  mandate  of  the  State  constitution  is  not  effective  as 
a  restraint  upon  legislative  power  when  it  is  made  depend- 
ent upon  affirmative  legislative  action,  and  is  consequently 
necessarily  addressed  to  legislative  discretion,  as  there  is 
no  method  of  enforcing  legislative  action  by  judicial 
authority,  even  in  obedience  to  such  a  constitutional  man- 
date. A  State  tax  therefore  does  not  require  an  express 
authorization  in  the  State  constitution,  but  it  does  require 
express  legislative  authority. l 

Thus  a  constitutional  provision  that  all  laws  exempting 
property  from  taxation  shall  be  void  applies  to  affirmative 
exemptions,  not  to  laws  which  do  not  in  terms  exempt  cer- 
tain property,  and  not  to  mere  casual  omissions.  While 
the  Constitution  may  make  it  the  clear  duty  of  the  legis- 
lature to  see  that  no  class  of  property  in  the  State  escapes 
taxation,  unless  the  legislature  exercises  its  legitimate 
function  and  subjects  certain  property  to  taxation,  the 
constitutional  provision  cannot,  because  of  such  lack  of 
legislation,  become  self-enforcing. 2 

§  432.    State   construction   of   legislative   authority   con- 
clusive. 

While  the  legislature  must  select  the  subjects  of  taxation 
and  make  that  selection  effective  by  necessary  regulations 

1  The  cases  arising  under  constitutions  directing  legislative  action 
must  be  distinguished  from  tliose  under  constitutions  which  are  con- 
strued as  specifically  legislating  on  taxation,  naming  the  subjects  of 
taxation,  leaving  no  room  for  legislative  discretion,  see  People  v.  Keith, 
153  111.  609;  see  constitutions  infra.  Appendix. 

2  Supreme  Court  of  Missouri  in  Kansas  City  v.  Building  &  Loan 
Association,  145  Mo.  50,  53.    It  was  held  in  the  same  State  that  where 


554  STATE  JURISDICTION  IN  TAXATION.  §   432 

for  assessment,  this  does  not  mean  that  every  species  of 
property  must  be  specifically  named  for  taxation.  General 
words  of  description  are  sufficient,  as  the  question  is  one  of 
determining  the  legislative  intent  by  the  ordinary  rules  of 
statutory  construction.  "  General  words  in  any  instrument 
or  statute  are  strengthened  by  exceptions,  and  weakened  by 
enumeration."!  The  courts  will  also  presume  that  the 
legislature  intended  to  carry  out  the  directions  of  the  con- 
stitution, and  will  so  construe  the  statute,  whenever  such 
construction  is  admissible. 

But  "  due  process  of  law  "  in  this  sense,  the  exercise  of 
the  taxing  power  of  the  State  under  its  constitution  and 
statutes,  is  conclusively  determined  by  the  State  courts, 
and  involves  no  Federal  question  after  such  determination 
has  been  made.  The  taking  of  property  by  State  taxing  offi- 
cials, without  due  process  of  State  law,  is  a  violation  of  the 
Federal  as  well  as  the  State  constitution ;  but  the  judgment 
of  the  State  court  is  conclusive  as  to  the  construction  of 
its  constitution  and  statutes ;  and  that  construction  will  be 
followed  by  the  Federal  courts,  in  whatever  form  their 
jurisdiction  may  be  invoked. 

Thus  in  Arkansas  the  State  constitution  declared  that 
all  laws  exempting  property  from  taxation,  other  than  as 
provided  therein,  should  be  void;  and  further  declared 
that  all  property  subject  to  taxation  should  be  "taxed 
according  to  value  to  be  ascertained,  in  such  manner  as  the 
General  Assembly  shall  direct,  making  the  same  equal  and 
uniform  throughout  the  State."  The  legislature  passed  an 
act  directing  the  Board  of  Railroad  Commissioners  not  to 


the  revenue  laws  direct  the  assessment  and  taxation  of  "all  real  estate 
not  exempt  therefrom,"  these  provisions  are  broad  enough  to  include 
property  held  by  a  municipality  as  trustee  for  charitable  uses,  St.  Louis 
V.  Wecnecker,  145  Mo.  230. 

1  Supreme  Court  of  Pennsylvania  in  Sfaarpless  v.  Mayor  of  Philadel- 
phia, 21  Pa.  St.  147. 


§    432  STATE  JURISDICTION  IN  TAXATION.  555 

include  in  the  schedule  of  property  of  railroad  companies 
assessed  by  them  "embankments,  tunnels,  cuts,  ties, 
trestles  or  bridges."  The  State  board  declined  to  follow 
this  direction,  deeming  the  act  unconstitutional,  and  in- 
cluded this  property  in  the  assessment.  The  railroad 
company  sought  in  the  State  court  to  enjoin  the  entire 
assessment  on  the  ground  that  the  action  of  the  board  was 
not  in  conformity  to  the  statute,  and  that  if  the  statute 
was  void,  the  whole  assessment  fell  with  it.  The  State 
court,  and  the  Supreme  Court  of  the  State  on  appeal,  held 
that  the  act  was  unconstitutional,  but  that  it  was  clearly 
separable  from  the  revenue  act,  and  that  the  assessment 
was  valid.  The  suit  was  carried  to  the  Supreme  Court  by 
writ  of  error,  and  at  the  same  time  was  heard  another 
case, wherein  suit  had  been  filed  in  the  United  States  Circuit 
Court  by  the  non-resident  trustees  of  a  mortgage  of  the 
railroad  company  seeking  the  same  relief,  and  wherein 
demurrer  had  been  sustained,  and  the  bill  dismissed  in  the 
Circuit  Court. 

The  Supreme  Court  i  affirmed  the  judgment  of  the  Cir- 
cuit Court,  and  dismissed  the  writ  of.  error  to  the  State 
Supreme  Court  because  there  was  no  Federal  question 
involved,  saying  on  this  latter  poiut:  "  The  complaint  of 
the  plaintiffs  in  error  and  appellants  is,  that  the  board  of 
railroad  commissioners  did  not  follow  the  act  of  the  legis- 
lature. If  that  act  was  valid,  no  ground  lay  for  complaint 
that  the  State  had  done  anything  to  deprive  the  company 
of  its  property  without  due  process  of  law.  If  the  act  was, 
in  the  particulars  mentioned,  unconstitutional,  as  the  Su- 
preme Court  of  the  State  afterward  held,  there  was  no  just 
ground  of  complaint  that  the  railroad  commissioners  had 
refused  to  follow  its  directions." 

In  affirming  the  judgment  of  the  Circuit   Court  it  was 

1  Huntington  v.  Wurthen,  120  U.  S.  1»7. 


556  STATE  JURISDICTION  IN  TAXATION.  §   433 

said,  that  under  the  State  constitution  laws  which  produce 
exemptions  indirectly  must  be  equally  inoperative  with 
those  which  exempt  directly;  that  the  conflict  between  the 
statute  and  constitution  was  obvious,  and  the  unconstitu- 
tional part  of  the  act  was  clearly  separable  from  the 
remainder. 

§  433.  The  constitutionality  of  statutes    is  for  judicial, 
not  executive  determination. 

In  the  cases  cited  in  the  three  preceding  sections,  the 
action  of  the  State  taxing  board  was  in  direct  opposition  to 
the  rule  that  the  constitutionality  of  statutes  is  for  judicial, 
not  executive  determination.  In  the  Indiana  case  the  tax- 
ing board  undertook  to  supply  the  omission  of  the  legisla- 
ture in  carrying  out  the  directions  of  the  constitution,  and 
this  it  was  held  they  had  no  power  to  do.  In  the  Arkansas 
case  the  tax  commission  refused  to  follow  the  directions  of 
the  legislature,  because  they  were  advised  that  the  act  was 
in  conflict  with  the  constitution.  In  this  they  were  subse- 
quently sustained  for  the  reason  that  the  act  was  held  by 
the  court  to  be  unconstitutional.  There  was  however  no 
conflict  with  the  law  declared  in  the  Indiana  case,  as  there 
is  a  clear  distinction  between  the  power  to  declare  invalid 
a  legislative  act,  conflicting  with  a  prohibitory  constitu- 
tional provision,  and  the  authority  of  an  executive  board  to 
supply  the  omission  of  the  legislature  to  obey  the  direc- 
tion of  the  Constitution. 

On  the  question  of  the  right  of  the  Arkansas  board  to 
pass  upon  the  validity  of  the  legislative  act,  the  Supreme 
Court  said:  "It  may  not  be  a  wise  thing,  as  a  rule,  for 
subordinate  executive  or  ministerial  officers  to  undertake  to 
pass  upon  the  constitutionality  of  legislation  prescribing 
their  duties,  and  to  disregard  it,  if  in  their  judgment  it  is 
invalid.  This  may  be  a  hazardous  proceeding  to  themselves, 
and  productive  of  great  inconvenience  to  the  public;   but 


§  433  STATE  JURISDICTION  IX  TAXATION.  557 

still  the  determination  of  the  judicial  tribunals  can  alone 
settle  the  legality  of  their  action.  An  unconstitutional  act 
is  not  law;  it  binds  no  one,  and  protects  no  one."  i 

1  gee  State  v.  Auditor,  47  La.  Ann.  1G79,  where  the  right  of  execu- 
tive officers  to  pass  upon  the  constitutionality  of  a  law  is  denied. 


CHAPTER  XY. 

EQUAL  PROTECTION  OF  THE  LAWS. 

§  434.  Immediate  purpose  of  clause. 

435.  Wliat  is  "  the  equal  protection  of  the  laws?  " 

436.  Equality  in  taxation  under  Fourteenth  Araendment. 

437.  Equality  and  efficiency  in  taxation  through  diversity  of  methods. 

438.  Classification  for  taxation. 

439.  "  Equal  protection  of  the  laws  "  does  not  require  iron  rule  of 

equal  taxation. 

440.  Specification  of  railroads  is  reasonable  classification  for  taxation. 

441.  Special  methods  of  assessment  of  railroad  property  sustained. 

442.  Right  of  appeal  not  essential  to  "  equal  protection  of  the  laws." 

443.  Foreign  corporations  and  "  equal  protection  of  the  laws," 

444.  Exemption  of  producers  in  license  taxation. 

445.  Classification  in  taxation  and  iu  police  legislation  compared. 

446.  Difficulty  of  classification. 

447.  Inequality  of  burden  does  not  establish  invalidity  of  tax. 

448.  Equality  and  uniformity  in  inheritance  taxation, 

449.  "Equal  protection  of  the  laws  "  in  inheritance  taxation. 

450.  Classification  by  amount  in  license  taxation. 

451.  Property  taxation  and  inheritance  taxation  distinguished. 

452.  Classification  by  exemption. 

453.  Exemption  for  efficiency  in  taxation. 

454.  Conditions    which  warrant  classification. 

455.  Constitutional  amendment  held  unconstitutional. 

456.  Anti-Department  Store  Tax  held  unconstitutional, 

457.  Taxation  of  employers  of  foreign  born  persons  held  invalid. 

458.  Discriminations  between  residents  and  non-residents, 

459.  Illegal  discrimination  in  license  taxation. 

460.  Discrimination  in  expenditure  of  public  funds. 

461.  Discrimination  between  races  in  expenditure  of  school  funds. 

462.  Federal  and  State  guaranties  of  equal  taxation. 

§  434.  Immediate  purpose  of  clause. 

The  guaranty   iu   the  Fourteenth    Amendment   of   the 
equal  protection  of  the  laws  to  all  persons  within  the  juris- 
diction of  the  State  has  been  invoked  in  numerous  cases  of 
(558) 


§    435  EQUAL  PROTECTION  OF  THE  LAWS.  559 

alleged  discrimination,  not  only  in  taxation,  but  also  in  the 
exercise  of  the  police  power  of  the  State. 

This  phrase,  unlike  the  historic  phrase  "  due  process  of 
law,"  was  novel  in  American  constitutional  law,  and  its 
incorporation  in  the  amendment,  as  shown  by  the  history 
of  the  time,  was  clearly  for  the  purpose  of  emphasizing  the 
principle  of  equality  of  civil  rights  for  the  benefit  of  the 
newly  enfranchised  freedmen.  Attention  has  already  been 
called  to  the  difference  in  the  language  of  the  two  prohibi- 
tions. The  State  must  not  deprive  any  person  of  life,  lib- 
erty or  property  without  due  process  of  law,  but  the  equal 
protection  of  the  laws  is  limited  to  persons  within  its  juris- 
diction, so  that  a  foreign  corporation,  not  admitted  to  do 
business  in  the  State  and  therefore  not  within  its  juris- 
diction, could  not  claim  the  protection  of  this  clause  in  the 
Fourteenth  Amendment.  The  purpose  of  this  provision 
and  its  application  to  discriminations  in  taxation  are  clearly 
shown  in  the  Act  of  Congress  already  referred  to,i  which, 
was  enacted  to  enforce  this  primary  purpose  of  the  amend- 
ment, and  declares  that  all  persons  within  the  jurisdiction 
of  the  United  States  shall  have  equal  rights  with  white  citi- 
zens, including  equal  rights  in  taxation. 

§  435.  What  is  *'  tbe  equal  protection  of  the  laws?  " 

The  Supreme  Court  has  declined  to  define  what  is  the 
equal  protection  of  the  laws.  Thus  it  was  said  in  a  recent 
case,  holding  invalid  the  anti-trust  law  of  Illinois  :2  "  What 
may  be  regarded  as  a  denial  of  the  equal  protection  of  the 
laws  is  a  question  not  always  easily  determined,  as  the 
decisions  of  this  court  and  of  the  highest  courts  of  the 
States  will  show.  It  is  sometimes  difiicult  to  show  that  a 
State    enactment,   having  its  source  in  a  power  not  contro- 

1  §  1977,  R.  S.  U.S.  supra,  §310. 

2  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  1.  c.  558. 


560  EQUAL  PROTECTION  OF  THE  LAWS.  §   436 

verted,  infringes  rights  protected  by  the  National  Consti- 
tution. No  rule  can  be  formulated  that  will  cover  every 
case.  But  upon  this  general  question  we  have  said  that  the 
o-uaranty  of  the  equal  protection  of  the  laws  means  '  that  no 
person  or  class  of  persons  shall  be  denied  the  same  protec- 
tion of  the  laws  which  is  enjoyed  by  other  persons  or  other 
classes  in  the  same  place  and  in  like  circumstances.' ' '  The 
court  in  this  and  in  other  cases  quoted  the  language  of  Mr. 
Justice  Field  upon  the  amendment  in  one  of  the  early  cases, l 
where  he  said  ' '  that  equal  protection  and  security  should  be 
given  to  all  under  like  circumstances  in  the  enjoyment  of 
their  personal  and  civil  rights,"  and,  "  that  class  legislation, 
discriminating  against  some  and  favoring  others,  is  pro- 
hibited, but  legislation  which,  in  carrying  out  a  public  pur- 
pose, is  limited  in  its  application,  if  within  the  sphere  of  its 
operation  it  affects  alike  all  persons  similarly  situated,  is 
not  within  the  amendment." 

§  436.  Equality   in  taxation   under    Fourteenth   Amend- 
ment. 

The  o-uaranty  of  the  equal  protection  of  the  laws  there- 
fore is  directed  against  arbitrary  discriminations  in  taxa- 
tion, and  in  this  sense  secures  equality  in  taxation.  In 
this  however  no  new  right  in  relation  to  taxation  is  created. 
The  power  to  tax  was  inherent  in  the  sovereignty  of  the 
States  before,  as  it  has  been  since,  the  adoption  of  the 
amendment.  In  the  language  of  the  Supreme  Court,2  the 
"  amendment  conferred  no  new  and  additional  rights,  but 
only  extended  the  protection  of  the  Federal  Constitution 
over  rights  of  life,  liberty,  and  property  that  previously 
existed  under  all  State  constitutions."  The  guaranty  of 
equal  protection  of  the  laws  therefore  protects  the  citizen 

1  Barbier  v.  Connolly,  113  U.  S.  27,  p.  31. 

2  Mobile  &  Ohio  R.  Co.  v.  Tennessee,  153  U.  S.,  1.  c.  506. 


§  436        EQUAL  PROTECTION  OF  THE  LAWS.  561 

against  arbitrary  discriminations  effected  by  the  State  in 
the  exercise  of  its  power  of  taxation,  as  it  protects  him 
against  the  arbitrary  exercise  of  any  of  the  powers  of 
government. 

Mr.  Justice  Miller  said  in  the  opinion  in  Davidson  v. 
New  Orleans,!  page  106,  in  reference  to  the  claim  that 
plaintiff's  property  had  previously  been  assessed  for  the 
same  purpose  and  the  assessment  paid,  "  if  this  be  meant  to 
deny  the  right  of  the  State  to  tax  or  assess  property  twice 
for  the  same  purpose,  we  know  of  no  provision  in  the 
Federal  Constitution  which  forbids  this,  or  which  forbids 
unequal  taxation  by  the  States."  This  must  however  be 
construed  with  reference  to  the  facts  of  the  case  before  the 
court,  which  involved  a  special  assessment  for  a  public 
improvement.  The  claim  of  double  and  unequal  taxation 
was  apparently  based  upon  the  levy  of  this  tax  in  addition 
to  that  for  general  public  purposes  upon  complainant's 
property  with  other  property  of  the  State.  It  is  clear  that 
the  equal  protection  of  the  laws  does  not  prevent  that  form 
of  double  or  unequal  taxation. ^ 

The  equality  therefore  which  is  protected  by  the  Four- 
teenth Amendment  is  that  which  is  inherent  in  taxation, 
and  is  essential  to  a  valid  exercise  of  the  taxing  power. 
There  should  be,  not  only  a  public  purpose  pertaining  to 
the  district  taxed,  but  also  an  apportionment  by  the  legis- 
lative power  levying  the  tax  with  reference  to  a  uniform 
standard.  If  contribution  is  not  required  according  to  this 
principle  of  apportionment,  equally  and  uniformly  from  all  of 
the  same  class  of  subjects  within  that  jurisdiction,  it  is  not  a 
tax,  but  an  arliitrary  exaction.  Uniformity  and  equality  in 
this  sense,  like  a  public  purpose, ^  are  involved  in  the  very 
conception  of  taxation.     These  fundamental  principles  are 

1  See  §  361. 

2  Chapter  XIII,  supra. 

3  Loan  Assn.  u.  Topeka,  supra,  §  341. 


562  EQUAL  PROTECTION  OF  THE  LAWS.  §   437 

declared  by  many  of  the  State  constitutions,  some  of  which 
contain  also  the  provision  that  taxes  shall  be  levied  for  a 
public  purpose  only ;  but  such  provisions  do  little  more  than 
state  in  precise  language  the  principles  of  constitutional 
law  which,  whether  declared  or  not,  would  inhere  as  essen- 
tial limitations  in  the  power  of  taxation.^ 

§  437.  Equality  and  efficiency  in  taxation  through  diver- 
sity of  methods. 

It  is  not  however  necessary  to  uniformity  and  equality 
in  this  fundamental  sense  that  all  the  subjects  of  taxation 
in  the  State  should  be  taxed  in  the  same  manner  or  by  the 
same  system  of  assessment.  This  would  obviously  be  im- 
possible, as  the  taxing  power  extends  not  only  to  property, 
but  to  occupations  and  persons  within  the  State's  jurisdic- 
tion, and  the  same  rule  of  assessment  could  not  be  applied 
to  these  different  classes  of  subjects.  Even  as  to  property 
taxation  alone,  the  complicated  conditions  of  modern  indus- 
trial civilization  and  the  mobility  of  many  forms  of  per- 
sonal property  which  effectually  elude  the  tax-gatherer,  re- 
quire special  adjustment  of  taxing  sj'stems  to  insure  even 
an  approximation  to  equality  in  the  distribution  of  public 
burdens. 

The  general  property  tax,  that  is,  the  taxation  of  every- 
thing, tangible  and  intangible,  seen  and  unseen,  by  one 
uniform  rule,  is  the  natural  outgrowth  of  our  political  con- 
ditions, but  has  proven  inadequate  in  the  complexity  of 
modern  conditions  and  has  developed  the  grossest  form  of 
inequalit3^  This  has  been  pointed  out  b}''  an  eminent  econ- 
omist,^  who  says  that  a  tax  which  aims  to  be  equal  but  is 
ineffectual,  produces  a  kind  of  inequality,  tending  to  increase 

1  Cooley  on  Constitutional  Limitations,  2d  Ed.,  p.  546. 

2  President  Hadley  of  Yale  University  in  Johnson's  Encyclopedia,  title 
'<  Taxation." 


§   438  EQUAL  PROTECTION  OF  THE  LAWS.  563 

as  time  goes  on,  and  worse  than  all  other  kinds;  but  that  a 
tax  which  aims  to  be  effective,  even  in  apparent  disregard 
of  equalitjs  tends  by  a  constant  process  of  economic  adjust- 
ment to  be  more  and  more  equal. ^ 

§  438.  Classification  for  taxation. 

It  necessarily  follows  therefore  that  special  forms  of  tax- 
ation adjusted  to  different  classes  of  property  are  found 
essential  in  the  administration  of  State  taxing  systems,  and, 
in  the  absence  of  specific  constitutional  restrictions  requiring 
all  property  to  be  taxed  according  to  the  same  method  of 
assessment,  are  consistent  with  the  fundamental  principles 
of  equality  and  uniformity  inherent  in  taxation.  Thus  it 
has  been  determined  that  the  right  to  levy  special  assess- 
ments for  public  improvements  ^  is  consistent  with  these 
principles,  provided  the  assessment  is  uniform  in  the  same 
taxing  district,  and  the  constitutional  requirement  in  ;nany 
State  constitutions  that  taxes  upon  property  shall  be  in  pro- 
portion to  value  has  been  held  not  to  apply  to  other  forms 
of  taxation,  such  as  taxes  upon  business,  incomes  and  the 
like,  provided  they  are  uniform  upon  the  same  class  of 
subjects.^  Avery  large  discretion  therefore  is  necessarily 
vested  in  the  legislature,  in  order  that,  subject  to  the  re- 
quirements of  the  State  constitution  in  regard,  to  selecting, 
specializing  and  classifying  the  subjects  of  taxation,  it  may 
adjust  the  system  of  taxation  to  local  conditions,  so  as  to 
assure  the  nearest  approximation  to  equalit3\  This  right 
to  select,  specialize  and  classify  is  for  the  purpose  of  best 
securing  equality  in  taxation  through  the  efficiency  of  the 
system    adopted,  and   is  clearly  distinguished  in  its  xevy 

1  See  also  the  New  York  Tax  Commissioners'  Report  of   1871;  David 
A.  Wells'  ''  Theory  apd  Practice  of  Taxation." 

2  Supra,  Chapter  XIII. 

2  Glasgow  V.  Rowse,  43  Mo.  479. 


564  EQUAL  PROTECTION  OF  THE  LAWS.  §  438 

nature  from  discriminations  in  classification  which  are  made 
for  the  very  purpose  and  which  have  the  necessary  result 
of  imposing  upon  obnoxious  classes  a  burden  from  which 
favored  classes  are  relieved. 

The  right  to  specialize  and  classify  for  taxation  must  be 
exercised  subject  to  the  restrictions  in  the  State  constitu- 
tion, which  in  many  cases  requires  all  property  to  be  taxed 
according  to  a  uniform  rate,  and  thus  precludes  the  subjec- 
tion of  any  property  to  a  different  rate.i  Under  such  con- 
stitutional restrictions  it  may  become  important  to  deter- 
mine whether  a  tax  is  levied  as  a  property  tax  or  as  a 
license  tax  upon  the  business  conducted  or  privilege  exer- 
cised. K  a  property  tax,  it  must  be  levied,  under  the  rule 
of  uniformity,  according  to  the  rate  limited  by  the  consti- 
tution; while,  if  a  business  or  privilege  tax,  it  is  not  sub- 
ject to  such  requirement,  though  it  must  be  uniform  upon 
all  of  the  same  class  of  subjects. ^  The  equal  protection  of 
the  laws  guaranteed  by  the  Federal  constitution  has  of 
course  no  relation  to  such  specific  restrictions  in  State  con- 
stitutions. It  recognizes  the  right  to  specify  and  classify 
whether  in  property  or  business  taxation,  and  only  requires 
that  the  classification  be  on  a  reasonable  basis  and  that  the 
tax  be  uniform  and  equal  as  to  all  of  the  same  class. ^ 

1  Thus  it  was  held  in  Oregon,  Ellis  v.  Frazier,  53  L.  R.  A.  454,  that 
the  imposition  of  a  specific  tax  of  $1.25  upon  each  bicycle  regardless  of 
value,  for  the  construction  of  bicycle  paths,  violated  a  constitutional 
requirement  that  the  rates  of  taxation  must  be  equal  and  uniform.  In 
Smith  V.  County  Oomraissioners,  117  Ala.  196,  a  tax  of  one  dollar  upon 
each  road  wagon,  for  the  benefit  of  public  roads,  was  held  to  violate  a 
similar  constitutional  provision.  And  in  Pittsburgh,  etc..  Railroad  Co. 
V.  State,  49  Ohio  St.  189,  and  16  L.  R.  A.  380,  a  statute  requiring  rail- 
roads to  pay  a  dollar  a  mile  for  each  mile  of  track  was  held  invalid  under 
the  State  constitution. 

2  See  State  ex  rel.  v.  Stephens,  146  Mo.  662. 

3  In  State  v.  Travelers' Ins.  Co.,  73  Conn.  255,  there  being  no  pro- 
vision in  the  State  constitution  restricting  the  legislative  power  of  taxa- 
tion, the    court    denied    that   the  Constitution  of  the   United  States 


§  439  EQUAL  PROTECTION  OF  THE  LAWS.  5(55 

§  439.  Equal  protection  of  the  laws  does  not  require  iron 
rule  of  eqvial  taxation. 

The  Supreme  Court  has  uniformly  observed  the  distinc- 
tion between  the  equality  in  taxation,  which  is  inherent  in 
the  conception  of  a  tax,  and  that  which  is  enforced  b}^  the 
requirement  that  everything  shall  be  taxed  in  the  same  man- 
ner, and  has  in  a  number  of  cases  affirmed  the  power  of  the 
State  to  make  reasonable  classifications  in  the  adjustment  of 
its  system  of  taxation  according  to  its  own  judgment  of  the 
public  needs.  The  leading  case  on  this  subject  is  Bell's  Gap 
Railroad  Co.  v.  Pennsylvania,^  wherein  the  court  affirmed 
on  motion  the  judgment  of  the  Supreme  Court  of  Pennsyl- 
vania. This  case  involved  the  validity  of  a  law  of  Penns}'!- 
vania,  subjecting  all  moneyed  securities  to  a  tax  at  the  rate 
of  three  mills  on  the  dollar  of  their  actual  value,  except 
bonds  and  other  securities  issued  by  corporations,  which 
were  taxed  at  three  mills  on  the  dollar  of  their  nominal  or 
par  value.  The  Supreme  Court,  through  Mr.  Justice  Brad- 
ley, declared  that  this  was  not  an  unjust  discrimination. 
The  presumption  is  that  corporate  securities  are  worth  their 
face,  and  under  the  law  the  persons  who  held  them  were 
not  affected  by  the  tax  unless  they  received  the  interest  from 
which  the  tax  was  paid.     The  court  added  at  page    237:  — 

"  But,  be  this  as  it  may,  the  law  does  not  make  any  dis- 
crimination in  this  regard  which  the  State  is  not  competent 
to  make.     All  corporate  securities  are  subject  to  the  same 

contains  any  provision,  express  or  implied,  requiring  taxation  to  be 
equal  and  uniform.  The  question  involved  was  as  to  the  validity  of  the 
classification  for  taxation  of  resident  and  non-resident  corporation 
stockholders,  and  the  decision  was  affirmed  by  the  Supreme  Court,  185 
U.  S.  364,  supra,  §  403  as  not  involving  any  discrimination.  The 
State  court  said  in  its  opinion  that  the  legislature  could  not  make  any  ex- 
action it  pleased  under  the  form  of  a  tax,  as  an  arbitrary  exaction  would 
be  neither  taxation  nor  legislation.  "  Such  guaranties  are  not  limita- 
tions upon  the  power  of  taxation,  but  on  all  power." 
1  134  U.  S.  233. 


566  EQUAL  PROTECTION  OF  THE  LAWS.  §   439 

reo-ulation.     The  provision  in  the  Fourteenth  Amendment, 
that  no  State  shall  deny  to  any  person  within  its  jurisdiction 
the  equal  protection  of  the  laws,  was  not  intended  to  pre- 
vent a  State   from  adjusting  its    system  of   taxation  in  all 
proper  and  reasonable  ways.     It  may,  if  it  chooses,  exempt 
certain  classes  of  property  from  any  taxation  at  all,  such  as 
churches,  libraries  and  the  property  of  charitable  institu- 
tions.   It  may  impose  diiferent  specific  taxes  upon  different 
trades    and   professions,    and  may  vary  the  rates  of  excise 
upon  various  products ;  it  may  tax  real  estate  and  personal 
property    in   a   different    manner;     it    may     tax     visible 
property    only,    and    not  tax    securities   for   payment  of 
money;    it    may    allow    deductions  for   indebtedness,  or 
not    allow    them.     All    such    regulations,     and    those  of 
like    character,    so    long    as    they    proceed    within    rea- 
sonable limits   and  general   usage,  are  within  the  discre- 
tion of  the  State  legislature,  or  the  people  of  the  State  in 
framinor  their  constitution.     But  clear  and  hostile  discrim- 
inations  against  particular  persons  and  classes,  especially 
such   as    are   of  an   unusual  character,    unknown    to   the 
practice  of  our  governments,    might  be  obnoxious  to  the 
constitutional    prohibition.      It   would,    however,    be   im- 
practicable and  unwise  to  attempt  to  lay  down  any  general 
rule   or   definition  on  the  subject   that  would   include  all 
cases.     They  must  be  decided  as  they  arise.    We  think  that 
we  are  safe  in  saying,  that  the  Fourteenth  Amendment  was 
not  intended  to  compel  the  State  to  adopt  an  iron  rule  of 
equal  taxation.     If  that  were  its  proper  construction,  it 
would  not  only  supersede  all  those  constitutional  provisions 
and  laws  of  some  of  the  States,  whose  object  is  to  secure 
equality  of  taxation,  and  which  are  usually   accompanied 
with   qualifications  deemed  material ;     but  it  would  render 
nugatory  those  discriminations  which  the  best  interests  of 
society  require ;  which  are  necessary  for  the  encouragement 
of  needed  and  useful  industries,  and  the  discouragement  of 


§  440        EQUAL  PROTECTION  OF  THE  LAWS.  5G7 

intemperance  and  vice;  and  which  every  State,  in  one  form 
or  another,  deems  it  expedient  to  adopt." 

§  440.  Specification  of  railroads  is  reasonable  classifica- 
tion  for  taxation. 

This  principle  of  chissification  has  been  apphed  to  rail- 
roads by  the  Supreme  Court  in  a  number  of  cases,  and  the 
power  of  the  States  to  specify  railroads  as  a  class  for  taxa- 
tion has  been  upheld.  This  was  declared  in  a  recent  decision 
sustaining  a  statute  of  Florida, i  whereby  a  reassessment^ 
of  railroads  was  ordered  for  certain  years  in  which  taxes 
had  not  been  paid,  while  no  provision  was  made  in  regard 
to  reassessment  of  other  property  which  had  been  under- 
assessed during  the  same  period.  The  court  said  that  taxes 
are  not  debts  in  the  ordinary  sense  of  the  term,  and,  after 
quoting  the  language  of  the  Bell's  Gap  Railroad  case, 
added,  at  page  476:  — 

"  It  is  well  known  that  the  States  vary  materially  in  their 
systems  of  taxation.  Each  determines  for  itself  what  in 
its  judgment  is  best  for  the  interests  of  its  people.  In 
some  there  are  general  exemptions  of  particular  classes  of 
property,  such  as  property  used  for  religious,  educational 
and  benevolent  purposes.  Some,  in  order  to  encourage 
certain  industries,  such  as  manufacturing,  make  either  gen- 
eral or  special  exemptions.  Some  think  it  for  their  best 
interest  to  derive  their  revenues  from  personal  property, 
corporations  and  licenses,  and  exempt  real  estate.  In  some, 
contracts  for  exemption  are  authorized  by  the  State  con- 
stitution; in  others,  they  are  forbidden.  Now,  consider- 
ing the  great  diversity  in  these  systems  it  would  obviously 
have  worked  a  marked  revolution  if  the  first  section  of 
the  Fourteenth  Amendment  had  been  construed  as  com- 
pelling a  cast  iron  rule  of  equal  taxation.     It  was  not  in- 

1  Florida  Central  &  P.  R.  Co.  v.  Reynolds,  183  U.  S.  471. 


568  EQUAL  PROTECTION  OF  THE  LAWS.  §  440 

tended,  as  held  in  the  case  quoted  from,  and  also  in  Barbier 
V.  Connolly,  113  U.  S.  27,  to  restrain  the  legislature  from 
any  proper  and  legitimate  classification,  both  as  respects 
property  for  taxation  and  the  methods  of  assessment  and 
taxation.  Doubtless  it  would  prohibit  a  State  from  select- 
ing some  obnoxious  person,  and  casting  upon  his  property 
the  sole  burden  of  taxation,  or  a  burden  differing  from 
that  cast  upon  others  whose  property  was  similarly  situated ; 
but  it  does  not  prevent  a  State  from  exercising  its  judgment 
as  to  the  property  to  be  taxed  and  the  modes  of  taxation, 
providing  all  property  similarly  situated  is  treated  in  the 
same  way." 

If  the  State  had  deemed  it  necessary  to  encourage  the 
building  of  railroads,  it  would  have  had  the  power  to  ex- 
empt their  property;  and,  conversely,  the  State  might  have 
subjected  railroads  to  taxation  while  exempting  some  other 
classes  of  property.  Since  it  had  this  power  to  classify  in 
the  first  instance,  it  had  the  same  power  as  to  property, 
which  in  past  years  had  escaped  taxation.  Classification  is 
a  matter  of  State  poHcy  to  be  determined  by  the  State,  and 
the  Federal  government  is  not  charged  with  the  duty  of 
supervising  the  State's  action.  It  might  have  been  found 
that  the  railroad  delinquent  tax  was  large  and  that  on  the 
other  property  was  small,  not  worth  the  trouble  of  special 
provision  therefor.  The  court  added:  "  If  taxes  are  to  be 
reoarded  as  mere,  debts,  then  the  effort  of  the  State  to  col- 
lect from  one  debtor  is  not  prejudiced  by  its  failure  to 
make  like  effort  to  collect  from  another.  And  if  regarded 
in  the  truer  light  as  a  contribution  to  the  support  of  gov- 
ernment, then  it  does  not  lie  in  the  mouth  of  one  called 
upon  to  make  his  contribution  to  complain  that  some  other 
person  has  not  been  coerced  into  a  like  contribution."  i 

1  Justice  Brown  dissented,  saying  that  he  did  not  think  that  a  particu- 
lar species  of  property  could  be  arbitrarily  taken  and  subjected  to  a  spe- 
cific tax  for  a  series  of  years  on  the  ground  that  the  State  officers  had 


§  441        EQUAL  PROTECTION  OF  THE  LAWS.  569 

§  441.   Special  methods  of  assessment  of  railroad  property 
sustained. 

The  law-making  power  determines  all  questions  of 
discretion  or  policy  in  ordering,  assessing  and  collecting 
taxes, and  determining  the  necessary  rules  and  regulations. 
The  mere  fact  that  a  special  procedure  is  provided  for 
the  taxation  of  a  certain  clas«  of  property,  different  from 
that  provided  for  another  class  or  from  the  general  pro- 
cedure in  taxation,  will  not  make  the  act  providino-  such 
si^ecial  procedure  invalid.  These  are  matters  of  detail, 
within  the  legislative  discretion.! 

The  power  to  classify  property  for  taxation  on  any 
reasonable  basis,  includes  also  the  power  to  provide  special 
methods  of  assessment  for  the  different  classes.  Thus  a 
statute  of  a  State  assessing  railroad  property  which  re- 
quires the  company  to  return  the  length  of  the  road  within 
and  without  the  State,  values  the  property  within  as  an  en- 
tirety, and  distributes  to  each  county  and  cityalono-  the  line 
its  mileage  proportion,  is  valid.  The  court  said, 2  that 
there  was  no  merit  in  the  objection  that  the  defendants 
were  denied  the  equal  protection  of  the  laws.  The  Consti- 
tution does  not  forbid  the  classification  of  property  for  the 
purposes  of  taxation  and  the  valuation  of  different  classes 
by  different  methods.  The  fact  that  the  legislature  had 
chosen  to  call  a  railroad,  for  the  purposes  of  taxation,  real 
estate,  did  not  identify  it  with  farming  lands  and  town  lots 
in  such  a  sense,  as  to  require  the  employment  of  the  same 
methods  and  machinery  of  the  law  to  ascertain  the  value 
for  taxation. 

In  a  later  case, 3  the  court  sustained  a  statute  of  the  State 

neglected  their  duty,  and  added  that  this  kind  of  discrimination  seems 
to  be  measured  only  by  the  rapacity  of  the  legislature.. 

1  Thomas  v.  Gay,  169  U.  S.  283. 

2  Kentucliy  Railroad  Tax  Cases,  113  U.  S.  321. 

3  Columbus   Southern  R.  Co.  v.  Wright,  151   U.  S.  470,  affirming  89 
Ga.  574. 


570  EQUAL  PROTECTIOX  OF  THE  LAWS.  §   441 

of  Georgia,  which  enacted  a  system  of  taxing  raikoads, 
whereby  the  rolling  stock  and  other  unlocated  personal 
property  of  the  railway  was  distributed  for  taxation  pur- 
poses to  and  for  the  benefit  of  the  counties  traversed  by 
the  railroad.  The  argument  was  advanced  that  this  was 
an  unjust  discrimination,  because  other  personal  property, 
both  tangible  and  intangible,  was  taxed  in  and  by  the 
county  where  the  owner  resided.  There  was  in  this  no 
violation  of  the  Federal  Constitution,  the  Court  said, 
adding.  I.e.  p.  478:  — 

"This  is  hardly  an  open  question.  Various  modes  of 
taxino-  railroad  property  are  adopted  by  the  different  States. 
In  some,  railroad  companies  are  taxed  upon  their  property 
as  a  unit.  In  others,  the  road  and  the  property  in  each 
county  are  separately  assessed,  and  in  still  others,  the 
whole  road  is  assessed,  and  then  the  assessment  apportioned 
amono-  the  several  counties  and  towns.  These  and  all 
similar  modes  of  taxation  are  subject  to  the  legislative  dis- 
cretion of  the  respective  States,  and  do  not  ordinarily 
present  any  Federal  question  whatever.  But  the  mode  of 
distribution  of  the  unlocated  or  transitory  personal  property 
is  a  matter  of  regulation  by  the  State  legislature,  which  in  no 
wav  involves  a  violation  of  the  Fourteenth  Amendment." 
The  court  declared  that  it  was  clearly  within  the  prov- 
ince of  the  legislature  of  Georgia  to  give  such  property  a 
different  situs  for  taxation  from  that  of  the  company's 
principal  office. 

The  Supreme  Court  also  sustained  an  act  of  South  Caro- 
lina assessing  against  a  railroad  its  proportion  of  the  salary 
and  expenses  of  the  railroad  commissioners  of  the  State, 
under  the  provisions  of  the  general  railroad  law  thereof  .1 
There  was  no  denial  of  the  equal  protection  of  the  laws, 
although  the  railroads,   in  addition  to  this  burden  imposed 

1  Charlotte  RaUroad  Co.  v.  Gibbes,  142  U.  S.  386. 


§  442        EQUAL  PROTECTION  OF  THE  LAWS.  571 

upon  them  alone,  were  also  taxed  equall}^  with  other 
property.  They  received  special  privileges  from  the  State, 
their  business  was  affected  with  a  public  use,  andthej^  were 
properly  charged,  in  the  legislative  discretion,  with  their 
share  of  the  expenses  incurred  by  the  State  in  connection 
with  their  business.  - 

§  442.  Right  of  appeal  not  essential   to    *'  equal  protec- 
tion of  the  laws." 

While  due  process  of  law  requires  that  there  shall  be 
-opportunity  for  hearing  at  some  stage  in  the  valuation  of 
the  property,!  a  right  of  appeal  is  not  necessary,  nor  is 
there  any  denial  of  the  equal  protection  of  the  laws  because 
an  appeal  with  a  second  hearing  is  permitted  to  one  class 
of  taxpayers  while  not  allowed  to  another. 

Thus  it  was  said  by  the  Supreme  Court  in  the  Indiana 
railroad  cases :  2  — 

"Equally  fallacious  is  the  contention  that,  because  to 
the  ordinary  taxpayer  there  is  allowed  not  merely  one 
hearing  before  the  county  officials,  but  also  a  rio-ht  of 
appeal  with  a  second  hearing  before  the  State  board, 
while  only  the  one  hearing  before  the  latter  board  is  siven 
to  railroad  companies  in  respect  to  their  property,  there- 
fore the  latter  are  denied  the  equal  protection  of  the  laws. 
If  a  single  hearing  is  not  due  process,  doubling  it  will  not 
make  it  so ;  and  the  power  of  a  State  to  make  classifica- 
tions in  judicial  or  administrative  proceedino-s  carries 
with  it  the  right  to  make  such  a  classification,  as  will 
give  to  parties  belonging  to  one  class  two  hearings  before 
their  rights  are  finally  determined,  and  to  parties  belono-ino- 
to  a  different  class  only  a  single  hearing.  Prior  to  the 
passage  of  the  Court  of  Appeals  act  by  Congress,  in  1891, 


1  See  supra,  §  321. 

2  See  supra,  §  323. 


572  EQUAL  PROTECTION  OF  THE  LAWS.  §   443 

a  litigant  in  the  Circuit  Court,  if  the  amount  in  dispute 
was  less  than  $5,000,  was  given  but  a  single  trial  and  in  that 
court,  while  if  the  amount  in  dispute  was  over  that  sum 
the  defeated  party  had  a  right  to  a  second  hearing  and  in 
this  court.  Did  it  ever  enter  into  the  thought  of  any  one 
that  such  classification  carried  with  it  any  denial  of  due 
process  of  law?  "  ^ 

On  the  other  hand,  there  is  no  denial  of  the  equal  pro- 
tection of  the  laws  in  the  fact,  that  the  law  gives  the 
assessors  in  cases  of  corporations  two  chances  to  arrive  at 
the  correct  valuation  of  real  estate,  when  they  have  but 
one  in  the  case  of  individuals. 2 

§  443.  Foreign  corporations  and  "  equal  protection  of  the 
laws." 

As  already  seen,  a  State  may  impose  such  terms  and 
conditions  as  it  thinks  proper  in  admitting  foreign  corpora- 
tions to  do  business  in  its  jurisdiction,  and  it  does  not 
thereby  deny  the  corporation  equal  protection  of  the  laws.^ 
The  court  said  in  Home  Industrial  Co.  v.  New  York,  that 
equal  protection  of  tlie  laws  does  not  prevent  the  classifi- 
cation of  property  for  taxation,  subjecting  one  kind  of 
property  to  one  rate  of  taxation  and  another  kind  to  a 
different  rate,  distinguishing  between  franchises,  licenses 
and  privileges,  and  visible  and  tangible  property,  and 
between  real  and  personal  property,  nor  does  the  amend- 
ment prohibit  special  legislation.  Indeed  the  greater  part 
of  all  legislation  is  special,  either  in  the  extent  to  which  it 
operates,  or  the  objects  sought  to  be  attained  by  it.  And 
when  such  legislation  applies  to  artificial  bodies,  it  is  not 
open  to  objection  if  all  such  bodies  are  treated  alike  under 

1  154  U.  S.,  p.  427. 

2  New  YoTkv.  Barker,  179  U.  S.  279. 

3  Chapter  V. 


§  444  EQUAL  PROTECTION  OF  THE  LAWS.  573 

similar  circumstances  and  conditions  in  respect  to  the 
privileges  conferred  upon  them  and  the  liabilities  to  which 
they  are  subjected.  Under  the  statute  of  New  York,  all 
corporations,  joint-stock  companies  and  associations  of  the 
same  kind  were  subjected  to  the  same  taxation.  The  same 
rule  was  applicable  to  all  under  the  same  conditions  in 
determining  the  rate  of  taxation.  There  was  no  discrimin- 
ation in  favor  of  one  against  another  of  the  same  class. i 

§  444.  Exemption  of  producers  in  license  taxation. 

The  principle  of  classification  in  taxation  was  applied  by 
the  court  to  an  act  of  Louisiana  imposing  a  license  tax  of 
$3,500  on  the  business  of  refining  sugar  and  molasses,  and 
exempting  planters  and  farmers  refining  these  products  for 
themselves.  The  court,  sustaining  the  Supreme  Court  of 
Louisiana,  held  that  this  discrimination  did  not  violate  the 
Fourteenth  Amendment. 2 

1  Home  Ins.  Co.  v.  New  York,  134  U.  S.  594;  Philadelphia  Fire  Ins. 
Co.  V.  New  York,  119  U.  S.  110.  Justice  Harlan  in  his  dissenting  opinion 
in  the  latter  case  said :  "  The  denial  of  the  equal  protection  of  the 
laws  may  occur  in  various  ways.  It  will  most  often  occur  in  the  en- 
forcement of  laws  imposing  taxes.  An  individual  is  denied  the  equal 
protection  of  the  laws  if  his  property  is  subjected  by  the  State  to  higher 
taxation  than  is  imposed  upon  like  property  of  other  individuals  in  the 
same  community.  So,  a  corporation  is  denied  that  protection  when  its 
property  is  subjected  by  the  State,  under  whose  laws  it  is  organized,  to 
more  burdensome  taxation  than  is  imposed  upon  other  domestic  corpo- 
rations of  the  same  class.  So,  also,  a  corporation  of  one  State  doing 
business  by  its  agents  in  another  State  by  the  latter's  consent,  is  denied 
the  equal  protection  of  the  laws,  if  its  business  there  is  subjected  to 
higher  taxation  than  is  imposed  upon  the  business  of  like  corporations 
from  other  Sftates,  These  propositions  seem  to  me  to  be  indisputable. 
They  are  necessarily  involved  in  the  concession  that  corporations,  like 
individuals,  are  entitled  to  the  equal  protection  of  the  laws."  Justices 
Miller  and  Harlan  dissented  in  this  case  on  the  ground  that  the  tax  was 
in  effect  a  tax  upon  the  bonds  of  the  United  States  held  by  the  corpora- 
tion; see  Manchester  Ins.  Co.  v.  Herriott,  91  Fed.  711. 

2  American  Sugar  Refining  Co.  v.  Louisiana,  179  U.  S.  89,  affirming  61 
La.  Ann.  563.    Justice  Harlan  concurred  in  the  result. 


574         EQUAL  PROTECTION  OF  THE  LAWS.        §  444 

It  said  that  on  the  question  whether  the  sugar  company 
was  a  manufacturer,  within  the  meaning  of  the  Louisiana 
constitution,  it  was  bound  by  the  decision  of  the  Louisiana 
c»urt,  but  that  it  might  properly  consider  whether  the  com- 
pany was  denied  the  equal  protection  of  the  laws,  and  added 
at  page  92  :  — 

"  The  act  in  question  does  undoubtedly  discriminate  in 
favor  of  a  certain  class  of  refiners,  but  this  discrimination, 
if  founded  upon  a  reasonable  distinction  in  principle,  is 
valid.  Of  course,  if  such  discrimination  were  purely  arbi- 
trary, oppressive,  or  capricious,  and  made  to  depend  upon 
diifferences  of  color,  race,  nativitjs  religious  opinions,  politi- 
cal affiliations,  or  other  considerations  having  no  possible  con- 
nection with  the  duties  of  citizens  as  taxpayers,  such  exemp- 
tion would  be  pure  favoritism,  and  a  denial  of  the  equal 
protection  of  the  laws  to  the  less  favored  classes.  But  from 
time  out  of  mind  it  has  been  the  policy  of  this  government, 
not  only  to  classif}^  for  purposes  of  taxation,  but  to  exempt 
producers  from  the  taxation  of  the  methods  employed  by 
them  to  put  their  products  upon  the  market.  The  right  to 
sell  is  clearly  an  incident  to  the  right  to  manufacture  or 
produce,  and  it  is  at  least  a  question  for  the  legislature  to 
determine  whether  anything  done  to  prepare  a  product  most 
perfectly  for  the  needs  of  the  market  shall  not  be  treated 
as  an  incident  to  its  growth  or  production.  The  act  is  not 
one  exempting  planters  who  use  their  sugar  in  the  manu- 
facture of  articles  of  a  wholly  different  description,  such  as 
confectionery,  preserves  or  pastry,  or  such  as  one  which 
should  exempt  the  farmer  who  devoted  his  corn  or  rye  to 
the  making  of  whiskey,  while  other  manufacturers  of  these 
articles  were  subjected  to  a  tax.  A  somewhat  different  ques- 
tion might  arise  in  such  case,  since  none  of  these  articles 
are  the  natural  products  of  the  farm,  —  such  products  only 
becoming  useful  by  being  commingled  with  other  ingre- 
dients.    Refined  sugar,  however,  is  the  natural  and  ultimate 


§  445        EQUAL  PROTECTION  OF  THE  LAW^.  575 

product  of  the  cane,  and  the  various  steps  taken  to  perfect 
such  product  are  but  incident  to  the  original  growth." 

The  court  said  that  similar  discriminations  in  Acts  of 
Cono-ress  had  been  sustained,  and  that  the  one  in  question 
was  obviously  intended  as  an  encouragement  to  agriculture 
and  did  not  deny  to  persons  and  corporations  engaged  in 
the  general  refining  business  the  equal  protection  of  the  laws. 

§  445.  Classiflcatiou  in   taxation    and    in    police  legisla- 
tion compared. 

In  the  case  last  cited  the  court  sustained  the  right  of  the 
State  to  discriminate  in  taxation  by  exempting  a  certain 
class  of  producers  for  the  reason  that  the  exemption  was 
not  pure  favoritism,  but  was  based  upon  legitimate  consid- 
erations of  public  policy.  The  question  is  thus  left  open 
for  determination,  in  every  case  of  classification  for  taxa- 
tion, whether  the  discrimination  is  arbitrary  and  oppressive 
or  natural  and  reasonable.  This  decision  sustaining  the 
Louisiana  tax  was  strongly  urged  at  the  following  term  in 
defense  of  the  anti-trust  law  of  Illinois. i  The  court  how- 
ever held  the  law  invalid  on  the  ground  that  agricultural 
products  or  live  stock  in  the  hands  of  the  producer  or 
raiser  were  exempted  from  the  operation  of  the  statute, 
which  prohibited  the  recovery  of  the  price  of  the  article 
sold  by  any  trust  or  combination  formed  in  restraint  of 
trade  or  competition  in  violation  of  the  act.  This  discrim- 
ination was  held  to  be  a  denial  of  the  equal  protection  of 
the  laws ;  and,  answering  the  argument  that  the  case  was 
controlled  by  the  decision  in  the  case  last  cited  and  that  of 
Bell's  Gap  R.  Co.  v.  Pennsylvania,  supra,  §  439,  the  court 
said,  1.  c.  p.  562  :  — 

"  The  decision  now  rendered  is  not  at  all  in  conflict  with 
the  views  expressed  in  the  two  cases  just  cited.     It  is  sufli- 

1  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  540. 


576  EQUAL  PROTECTION  OF  THE  LAWS.        §  445 

cient  to  say  that  those  cases  had  reference  to  the  taxing 
power  of  the  State,  and  involved  considerations  that  could 
not,  in  the  nature  of  things,  apply  to  a  State  enactment 
like  the  one  involved  in  the  present  case.  The  power  to 
tax  persons  and  property  is  an  incident  of  sovereignt}',  and 
the  extent  to  which  it  may  be  exerted  has  been  indicated  in 
numerous  cases.  Taxing  laws,  it  has  been  well  said,  fur- 
nish the  measure  of  every  man's  duty  in  support  of  the 
public  burdens  and  the  means  of  enforcing  it.  A  tax  may 
be  imposed  only  upon  certain  calhngs  and  trades,  for  when 
the  State  exerts  its  power  to  tax,  it  is  not  bound  to  tax  all 
pursuits  or  all  property  that  may  be  legitimately  taxed  for 
governmental  purposes.  It  would  be  an  intolerable  burden 
if  a  State  could  not  tax  any  property  or  calling,  unless,  at 
the  same  time,  it  taxed  all  property  or  all  callings.  Its 
discretion  in  such  matters  is  very  great,  and  should  be  exer- 
cised solely  with  reference  to  the  general  welfare  as  in- 
volved in  the  necessity  of  taxation  for  the  support  of  the 
State.  A  State  may,  in  its  wisdom,  classify  property  for 
purposes  of  taxation,  and  the  exercise  of  its  discretion  is 
not  to  be  questioned  in  a  court  of  the  United  States,  so 
long  as  the  classification  does  not  invade  rights  secured  by 
the  Constitution  of  the  United  States." 

But,  the  court  said,  it  is  one  thing  to  exert  the  power  of 
taxation  so  as  to  meet  the  expense  of  the  government,  at 
the  same  time  indirectly  building  up  or  protecting  particu- 
lar interests,  and  quite  a  different  thing  to  discriminate  in 
the  exercise  of  the  police  power  by  declaring  that  certain 
classes  shall  be  exempt  from  the  operation  of  general 
criminal  statutes.     It  continued:  — 

« '  We  must  not  be  understood  by  what  has  been  said  as 
conceding  that  the  question  of  a  denial  of  the  equal  pro- 
tection of  the  laws  can  never  arise  under  the  taxing- 
statutes  of  a  State.  On  the  contrary,  the  power  to  tax  is 
so  far  limited  that  it  cannot  be  used  to  impair  or  destroy 


§  446        EQUAL  PROTECTION  OF  THE  LAWS.  577 

rio-hts  that  are  given  or  secured  by  the  supreme  law  of  the 
land.  We  only  need  to  say,  in  this  connection,  that  the 
constitutional  validity  of  the  statute  of  Illinois  now  before 
us  is  not  necessarily  to  be  determined  by  the  same  princi- 
ples that  apply  to  taxing  laws."  i 

§  446.  Difflcultj'  of  classification. 

The  difficulty  in  drawing  the  line  between  reasonable  and 
unreasonable  classification  is  forcibly  illustrated  by  two 
decisions  of  the  Supreme  Court,  one  holding  void  and  the 
other  holding  valid  under  the  guaranty  of  equal  protection 
of  the  laws  special  legislation  in  relation  to  railroads. 
Neither  was  a  case  of  taxation  proper,  both  relating  to 
taxation  of  costs  in  civil  actions.  The  former  involved 
an  act  of  the  State  of  Texas  requiring  railroad  companies 
in  all  cases  of  claims  under  $50  to  pay  an  attorney's  fee  of 
not  exceeding  $10  to  the  party  successfully  suing,  provided 
the  suit  was  brought  thirty  days  after  the  refusal  of  the 
company  to  pay  the  claim. 2     The  court  said  that  this  was  an 

1  Justice  McKenna  dissented,  saying -that  the  principle  of  clafsifl- 
cation  is  not  different  in  tax  laws  from  that  in  any  other  laws.  He 
aslied  "  what  ingenuity  can  find  a  difference  in  the  act  and  process  of 
sugar  refining  when  done  by  a  purchaser  of  raw  sugar,  and  a  raiser 
or  planter  of  it;  what  difference  in  the  product,  after  it  shall  be  re- 
fined, or  in  any  element,  thing,  or  circumstance  which  can  affect  its 
use  or  sale?  The  whole  and  only  distinction  in  the  classes  which  the 
statute  made  was  between  the  grower  of  sugar  and  the  buyer  of 
it  —  the  exact  and  only  distinction  of  the  Illinois  law  now  held  to  be 
void,  and  yet  the  Louisiana  law  was  sustained  as  constitutional."  He 
also  said  that  the  court  could  not  go  into  the  difference  of  situations 
on  which  the  discrimination  in  the  statute  was  based,  as  their  considera- 
tion of  such  differences  would  talse  them  from  legal  problems  to  economic 
ones,  adding:  "  This  demonstrates  to  my  mind  how  essentially  any  judg- 
ment or  action,  based  upon  those  differences,  is  legislative  and  cannot 
be  reviewed  by  the  judiciary." 

2  EailroadCo.  v.  Ellis,  165  U.  S.  150.  Chief  Justice  Fuller  and  Justices 
Gray  and  White  dissented,  saying  that  costs  in  civil  actions  at  law  are  the 
creature  of  statute;  and  that  there  was  a  reasonable  basis  for  the  classi- 
fication, as  railroads  might  vexatiously  refuse  to  pay  such  claims.    As  to 

37 


578  EQUAL  PROTECTION  OF  THE  LAWS.  §   446 

arbitrary  selection  which  could  never  be  justified  by  calling 
it  classification,  and  added  at  page  165:  "  It  is  apparent 
that  the  mere  fact  of  classification  is  not  sufficient  to  re- 
lieve a  statute  from  the  reach  of  the  equality  clause  of  the 
Fourteenth  Amendment  and  that  in  all  cases  it  must  appear 
not  only  that  a  classification  has  been  made,  but  also  that 
it  is  one  based  on  some  reasonable  ground,  some  difference 
which  bears  a  just  and  proper  relation  to  the  attempted 
classification,  and  is  not  a  mere  arbitrary  selection.  Tested 
by  these  principles  the  statute  in  controversy  cannot  be 
sustained." 

In  the  other  case  a  statute  of  Kansas  was  sustained  pro- 
viding that  in  all  actions  brought  for  damages  caused  by 
fire  from  the  operation  of  the  railroad,  the  court  should 
allow  the  plaintiff  on  recovery  a  reasonable  attorney's 
fee,  which  should  become  part  of  the  judgment.^  Justice 
Brewer,  who  had  rendered  the  opinion  of  the  court  in 
the  EUis  case,  supra,  also  wrote  this  opinion  holding 
that  there  was  a  reasonable  basis  for  this  legislation, 
which  fact  distinguished  it  from  the  Texas  statute.  There 
was  peculiar  danger  of  fire  from  the  running  of  railroad 
trains,  especially  in  a  prairie  State  like  Kansas;  and  so, 
when  the  legislature  of  that  State  made  a  classification 
and  included  in  one  class  all  corporations  engaged  in  this 
business  of  peculiar  hazard,   it  did  so   upon  a  difference 

the  regret  expressed  ia  the  opinion  that  the  court  was  not  favored  with 
a  brief  from  the  claimant,  that  is,  the  plaintiff  below,  the  dissent  said :  "  It 
is  hardly  surprising  that  the  owner  of  a  claim  for  fifty  dollars  only, 
having  been  compelled  to  follow  up  through  all  the  courts  of  the  State, 
the  contest  over  this  ten  dollar  fee,  should  at  last  have  become  dis- 
couraged, and  unwilling  to  undergo  the  expense  of  employing  counsel 
to  maintain  his  rights  before  this  court." 

In  Louisiana  Liquidation  Commissioners  v.  Marrero,  106  La.  130, 
a  provision  allowing  an  attorney's  fee  to  the  attorney  for  the  tax- 
gatherer,  to  be  paid  by  the  unsuccessful  tax  resistant,  was  held  not  vio- 
lative of  the  equality  clause  of  the  Fourteenth  Amendment. 

1  A.  T.  &  S.  F.  R.  Co.  V.  Matthews,  174  U.  S.  96. 


§   446  EQUAL  PROTECTION  OF  THE  LAWS.  579 

having  a  reasonable  relation  to  the  object  sought  to  be 
accomplished,  to  wit,  the  securing  of  protection  of  prop- 
erty from  damage  or  destruction  by  fire.  The  court  added, 
p.  103:1— 

"  Many  cases  have  been  before  this  court,  involving  the 
power  of  State  legislatures  to  impose  special  duties  or 
liabilities  upon  individuals  and  corporations,  or  classes  of 
them,  and  while  the  principles  of  separation  between  those 
cases  which  have  been  adjudged  to  be  within  the  power  of 
the  legislature  and  those  beyond  its  power,  are  not  difficult 
of  comprehension  or  statement,  yet  their  application  often 
becomes  very  troublesome,  especially  when  a  case  is  near 
to  the  dividing  line.  It  is  easy  to  distinguish  between  the 
full  light  of  day  and  the  darkness  of  midnight,  but  often 
very  difficult  to  determine  whether  a  given  moment  in  the 
twilight  hour  is  before  or  after  that  in  which  the  light 
predominates  over  the  darkness.  The  equal  protection  of 
the  law  which  is  guaranteed  by  the  Fourteenth  Amendment 
does  not  forbid  classification.  That  has  been  asserted  in 
the  strongest  language."  2 

1  Justice  Harlan,  with  whom  concurred  Justices  Brown,  Peckham  and 
McKenna,  dissented,  saying  that  the  case  could  not  be  distinguished 
from  the  Ellis  case,  and  adding  at  page  111 :  "  I  am  not  astute  enough 
to  perceive  that  the  Kansas  statute  is  consistent  with  the  Fourteenth 
Amendment,  if  the  Texas  statute  is  unconstitutional."  He  concluded: 
"  In  my  opinion  the  statute  of  Kansas  denies  to  a  litigant  upon  whom  no 
duty  has  been  imposed  by  statute  and  whose  liability  for  wrongs  done 
by  it  depends  upon  general  principles  of  law  applicable  to  all  alike, 
that  equality  of  right  given  by  the  law  of  the  land  to  all  suitors,  and 
consequently  it  should  be  adjudged  to  deny  the  equal  protection  of  the 
laws." 

2  The  difficulty  of  classification  is  illustrated  in  the  application  of 
these  decisions  of  the  Supreme  Court  to  the  Texas  statute  imposing  a 
penalty  of  twelve  per  cent  upon  life  and  health  insurance  companies 
where  a  loss  occurs,  which  is  not  paid  within  a  specified  time  after  de- 
mand. The  law  imposing  this  tax,  "with  reasonable  attorneys' fees," 
was  held  void  as  violative  of  equal  protection  of  the  laws,  by  the  Texas 
Court  of  Civil  Appeals  in   Smith  v.  New  York  Life  Ins.  Co.,  41  S.  W. 


580  '  EQUAL  PEOTECTION  OF  THE  LAWS.  §  447 

§  447.  Inequality  of  burden  does  not  establish  invalidity 
of  tax. 

The  inequality  of  burden  resulting  from  the  enforcement 
of  a  tax  does  not  necessaril}'^  establish  that  the  tax  itself  is 
unequal  and  a  denial  of  the  equal  protection  of  the  laws. 
Thus  an  act  of  Pennsylvania  allowing  banks  to  collect  from 
their  stockholders  and  pay  eight  mills  upon  the  dollar  of  the 
par  value  in  lieu  of  all  other  taxes,  instead  of  being  subject 
to  the  ordinary  rate  of  four  mills  upon  the  actual  value  of 
the  stock  and  surplus,  was  sustained.^  The  Supreme  Court 
said  that  there  was  no  discrimination  and  therefore  no  denial 
of  the  equal  protection  of  the  laws,  as  the  right  of  election 
was  offered  all  banks.  State  and  national,  and  that  a  State 
has  the  right  to  exempt  certain  corporations  from  all  taxa- 
tion, and  the  indirect  result  that  other  propertj^  has  to  pay  a 
larger  per  cent  does  not  invalidate  the  tax  on  it  or  give  any 
right  to  challenge  the  law,  as  obnoxious  to  the  provisions  of 
the  Federal  Constitution.  In  this  case  the  inequality  of  the 
result  came  from  the  election  of  certain  taxpayers  to  avail 
themselves  of  privileges  offered  to  all,  and  the  case  was 
therefore  analogous  to  that  incidental  inequality  resulting 
from  taxpaj^ers  avaihng  themselves  of  the  discount  offered 

Kep.  684,  the  court  following  the  decision  of  the  Supreme  Court  in  the 
then  recently  decided  case  of  Kairroad  Co.  v.  Ellis.  The  same  statute 
has  since  been  held  valid  by  the  United  States  Circuit  Court  of  Appeals 
in  Merchants'  Life  Association  v.  Yoakum,  98  Fed.  Eep.  251;  and  very 
recently  by  the  Supreme  Court  in  Fidelity  Mutual  Life  Association  v. 
Mettler,  185  U.  S.  308,  Justices  Harlan  and  Brown  dissenting,  and 
Brewer,  J.,  concurring  in  the  judgment,  as  a  valid  classification,  and  also 
valid  as  a  condition  upon  foreign  corporations  doing  business  in  the  State. 

In  Clark  w.  Kansas  City,  176  U.  S.  114,  the  Supreme  Court  sustained 
an  act  allowing  cities  to  annex  adjoining  territory,  providing  that  the 
act  should  not  apply  to  tracts  of  land  used  for  agricultural  purposes, 
when  the  land  was  not  owned  by  any  railroad  or  other  corporation. 
The  court  held  without  dissent  that  the  discrimination  was  reasonable 
and  not  arbitrary. 

1  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461. 


§  448        EQUAL  PROTECTION  OF  THE  LAWS.  581 

for  payment  before  a  specified  time.  The  court  quoted 
approvingly  the  language  of  the  Supreme  Court  of  Penn- 
sylvania: "the  argument  is  that  inequality  of  burden  estab- 
lishes the  unconstitutionality  of  the  law  under  which  the 
tax  is  levied.  If  the  validity  of  our  tax  laws  depends  upon 
their  ability  to  stand  successfully  this  test,  there  are  none 
of  them  that  can  stand." 

§  448.  Equality  and  uniformity  in  inheritance  taxation. 

The  relation  of  the  Federal  guaranty  of  equal  protection, 
of  the  laws  to  the  requirement  of  uniformity  and  equality 
in  the  State  constitutions  is  forciblj'"  illustrated  in  the  de- 
cisions of  the  Supreme  Court  and  some  of  the  State 
Supreme  courts  relating  to  the  classification  allowable  in. 
inheritance  taxation. 

In  the  courts  of  Ohio,^  Missouri,^  and  Minnesota,'  clas- 
sifications and  exemptions  based  upon  the  value  of  the 
estate  or  the  inheritance,  were  held  to  violate  constitutional 
requirements  of  equality  and  uniformity  in  taxation. 

In  the  Ohio  case,  the  Supreme  Court  (of  the  State)  said 
that  a  progressive  rate  of  taxation,  according  to  the  values 
of  the  estate,  was  in  conflict  with  the  provision  of  the  Ohio 
constitution,  that  government  was  instituted  for  the  equal 
benefit  and  protection  of  the  people.  It  was  said  that  the 
scope  of  the  provision  for  equal  protection  of  the  laws 
under  the  Fourteenth  Amendment  was  not  broader  than 
the  State  Bill  of  Eights,  and  that  a  statute  authorized  by 
the  latter  would  not  be  in  conflict  with  the  Constitution  of 
the  United  States. 

In  Missouri,  an  inheritance  tax  wherein  a  progressive 

1  State  ex  rel.  Schwartz  ».  Ferris,  53  Ohio  St.  314,  and  30  L.  R.  A. 
218. 

2  State  ex  rel.  v.  Switzler,  143  Mo.  287. 

3  State  V.  Gorman,  40  Minn.  232.    See  also  State  v.  Mann,  76  Wis.  469. 


582  EQUAL  PROTECTION  OF  THE  LAWS.        §  448 

rate  was  based  on  the  value  of  the  estate,  was  held  by  the 
State  court  to  violate  the  constitutional  requirement  that 
taxation  should  be  ' '  uniform  upon  the  same  class  of  sub- 
jects within  the  territorial  limits  of  the  authority  levying 
the  tax." 

In  Minnesota  a  probate  tax,  graduated  according  to  the 
value  of  the.  estate,  violated,  according  to  the  State  court, 
two  provisions  of  the  State  constitution,  one  guaranteeing 
"  justice  freely  and  without  purchase,  promptly  and  with- 
out delay,"  and  the  other  providing  that  "  all  taxes  are  to 
be  as  nearly  equal  as  may  be,  and  all  property  on  which 
taxes  are  to  be  levied  shall  have  a  cash  valuation  and  be 
equalized  and  uniform  throughout  the  State." 

The  Supreme  Court  of  New  Hampshire  went  further,* 
and  held  that  the  exemption  of  husband,  wife,  children 
and  grandchildren  was  violative  of  the  rule  in  the  consti- 
tution of  the  State  requiring  proportional  and  reasonable 
taxes.  This  ruling  has  not  been  followed  in  other  States; 
and  it  is  held  that  classification  in  inheritance  taxation,  based 
wholly  upon  the  degree  of  relationship,  so  that  the  tax  is 
levied  at  a  uniform  rate  upon  those  bearing  the  same  rela- 
tionship to  the  testator,  is  reasonable  and  open  to  no 
constitutional  objection.  In  the  language  of  the  Supreme 
Court  of  Massachusetts,  such  a  classification  has  a  sanction 
in  reason,  for  the  moral  claim  of  collaterals  and  strangers 
is  less  than  that  of  kindred  in  the  direct  line,  and  the 
privilege  is  therefore  greater. ^  But  a  discrimination  be- 
tween residents  and  non-residents  of  the  State,  by  impos- 
ino-  an  inheritance  tax  upon  certain  collaterals  when  non- 

1  Curry  v.  Spencer,  61  N.  H.  624. 

2  Minot  V.  Winthrop,  162  Mass.  113,  one  judge  dissenting  on  the 
ground  that  the  exeraption  of  estates  not  exceeding  f  10,000.00  in  value 
was  unreasonable;  State  v.  Alston,  94  Teun.  674;  State  v.  Hamlin,  86 
Me.  495  and  25  L.  R.  A.  632;  Thyson  v.  State,  28  Md,  577;  Eyre  v.  Jacob, 
14  Grattan  (Va.),422;  Billings  u.  People,  189  111.  472;  State  w.  Henderson, 
160  Mo.  190;  Gellsthorpe  v.  Fernell,  20  Mont.  299. 


§  449        EQUAL  PROTECTION  OF  THE  LAWS.  583 

residents  of  the  State,  has    been  held  an  illegal  classifica- 
tion.^ 

§  449.  *'  Equal  protection  of  the    laws  "   in    inheritance 
taxation. 

The  Supreme  Court  however,  affirming  the  judgment 
of  the  Supreme  Court  of  Illinois, ^  sustained,  as  valid  under 
the  Fourteenth  Amendment,  the  inheritance  tax  of  that 
State,  which  was  levied  at  discriminating  progressive  rates 
graduated  according  both  to  the  degrees  of  relationship 
and  to  the  amounts  inherited.  The  court  said  that,  as  to 
the  equal  protection  of  the  laws,  what  affords  this  equality 
has  not  been  and  probably  never  can  be  precisely  defined ; 
and,  after  citing  former  opinions  of  the  court,  that  it  does 
not  prohibit  legislation  which  is  limited  either  in  the  objects 
to  which  it  is  directed  or  by  the  territory  in  which  it  is  to 
operate,  continued  at  page  29?  :  — 

"  It  merely  requires  that  all  persons  subjected  to  such 
legislation  shall  be  treated  alike  under  like  circumstances 
and  conditions,  both  in  the  privilege  conferred  and  the  lia- 
bilities imposed.  Hayes  v.  Missouri,  120  U.  S.  68.  Sim- 
ilar citations  could  be  multiplied.  But  what  is  the  test  of 
likeness  and  unlikeness  of  circumstances  and  conditions? 
These  expressions  have  almost  the  generality  of  the  princi- 
ple they  are  used  to  expound,  and  yet  they  are  definite 
steps  to  precision  and  usefulness  of  definition,  when  con- 
nected with  the  facts  of  the  cases  in  which  they  are  em- 
ployed.    With  these  for  illustration  it  may  be  safely  said 

1  In  re  Mahoney's  Estate,  133  Cal.  180.  The  decision  was  based  on  the 
ground  that  the  discrimination  was  in  violation  of  Article  IV,  Section 
2,  of  the  Constitution  of  the  United  States,  that  the  citizens  of  each  State 
shall  be  entitled  to  all  the  privileges  and  iramunities  of  citizens  in  the 
several  States,  and  also  violative  of  Sec.  1977,  R.  S.  of  U.  S.  supra,  §  310. 

2  Magoun  V.  Illinois  Trust  &  Savings  Bank,  170  U.  S.  283,  afflrnaing  167 
111.  122. 


584  EQUAL.  PROTECTIOX  OF  THE  LAWS.  §   449 

that  the  rule  prescribes  no  rigid  equality  and  permits  to  the 
discretion  and  wisdom  of  the  State  a  wide  latitude  as  far  as 
interference  by  this  court  is  concerned.     »     *     * 

"The  rule,  therefore,  is  not  a  substitute  for  municipal 
law ;  it  only  prescribes  that  that  law  have  the  attribute  of 
equahty  of  operation,  and  equality  of  operation  does  not 
mean  indiscriminate  operation  on  persons  merely  as  such, 
but  on  persons  according  to  their  relations.  In  some  cir- 
cumstances it  may  not  tax  A  more  than  B,  but  if  A  be  of 
a  different  trade  or  profession  than  B,   it    may.     *     *     * 

"  In  other  words,  the  State  may  distinguish,  select  and 
classify  objects  of  legislation,  and  necessarily  this  power 
must  have  a  wide  range  of  discretion.  It  is  not  without 
limitation,  of  course.  '  Clear  and  hostile  discriminations 
ao-ainst  particular  persons  and  classes,  especiallj^  such  as 
are  of  unusual  character,  unknown  to  the  practice  of  our 
governments,  might  be  obnoxious  to  the  constitutional  pro- 
hibition." 

On  page  296,  the  court  says:  "  There  is  therefore  no 
precise  application  of  the  rule  of  reasonableness  of  classifi- 
cation, and  the  rule  of  equality  permits  many  practical 
inequalities.  And  necessarily  so;  in  a  classification  for 
governmental  purposes  there  cannot  be  an  exact  exclusion 
or  inclusion  of  persons  and  things.  " 

In  reference  to  the  cases  from  the  State  courts,  above 
cited,  it  was  said,  1.  c.  p.  292:  "They  are  authority 
against  the  Illinois  statute.  But  it  is  not  necessary  to 
dwell  on  the  points  of  agreement  of  the  cases.  Our  inquiry 
must  be  not  what  will  satisfy,  the  provisions  of  the  State 
Constitutions,  but  what  will  satisfy  the  rule  of  the  Federal 
Constitution.  The  power  of  the  State  over  successions 
may  be  as  plenary  in  the  abstract  as  appellee  contends  for. 
Nevertheless,  it  must  be  exerted  within  the  limits  of  that 
constitution.  K  the  power  of  devise  or  of  inheritance  be  a 
privilege,  it  must  be  conferred  or  regulated  by  equal  laws." 


§  449  EQUAL  PROTECTION  OF  THE  LAWS.  585 

•  Applying  these  principles  to  the  statute,  it  was  held  that 
the  classification  of  the  Illinois  law  was  within  the  power  of 
the  legislature  to  make  and  was  reasonable ;  and  that  the 
State  had  the  power  to  regulate  succession.  It  was  true 
that  the  amount  of  the  exemption  (estates  under  $20,000 
were  not  taxed)  was  greater  in  the  Illinois  law  than  in  any 
other,  but  this  was  a  matter  depending  upon  the  judgment 
of  the  legislature  in  each  State  and  could  not  be  subjected 
to  judicial  review.  The  court  followed  the  Illinois  court 
in  holding  that  the  tax  was  imposed  on  the  succession,  which 
is  to  be  regarded  as  ' '  new  property  "  ^  of  the  legatee  or 
distributee. 


1  Justice  Brewer  dissented  from  the  opinion,  so  far  as  it  sustained 
tliat  part  of  the  law  which  graded  the  rate  of  the  tax  upon  legacies 
to  strangers  by  the  amount  of  such  legacies,  saying,  1.  c.  p.  301:  "If 
this  were  a  question  in  political  economy,  I  should  not  dissent,  but  it 
is  one  of  constitutional  limitations.  Equality  in  right,  in  protection 
and  in  burden,  is  the  thought  which  has  run  through  the  life  of  this 
nation  and  its  constitutional  enactments  from  the  Declaration  of  Inde- 
pendence to  the  present  hour."  Again,  at  p.  302:  "  It  seems  to  be  con- 
ceded that  if  this  were  a  tax  upon  property,  such  increase  in  the  rate 
of  taxation  could  not  be  sustained,  but  being  a  tax  upon  the  succes- 
sion, it  is  held  that  a  different  rule  prevails; "  and  concluded:  "But 
whatever  may  be  the  power  of  the  legislature,  Illinois  had  regulated 
the  matter  of  descents  and  distributions  and  had  granted  the  right  of 
testamentary  disposition.  And  now  by  this  statute  upon  property 
passing  in  accordance  with  its  statutes  a  tax  is  imposed :  a  tax  unequal 
because  not  proportioned  to  the  amount  of  the  estate;  unequal  because 

based   upon  a  classiflcation  purely  arbitrary,  to  wit,  that  of  wealth a 

tax  directly  and  intentionally  made  unequal.    I  think  the  Constitution 
of  the  United  States  forbids  such  inequality." 

After  the  decision  in  the  Magoun  case,  the  Supreme  Court  of  Penn- 
sylvania, In  re  Estate  of  Cope,  191  Pa.  1,  and  45  L.  R.  A.  316,  held  the 
inheritance  tax  of  that  State,  which  exempted  §5,000  from  the  two  per 
cent  inheritance  tax  on  all  personal  property  passing  by  will,  etc., 
after  deducting  debts,  was  in  violation  of  the  Constitution  requiring  all 
taxes  to  be  uniform  upon  the  same  class  of  subjects,  and  prohibiting 
exemptions.  The  court  in  this  opinion  quotes  approvingly  the  dissent- 
ing ODinion  of  Justice  Brewer  in  the  Magoun  case. 


586         EQUAL  PROTECTION  OF  THE  LAWS.        §  451 

§  450.  Classification  by  amount  in  license  taxation. 

The  Supreme  Court  however,  in  a  recent  case,^  extended 
the  application  of  this  principle  of  classification  by  amount 
to  license  taxation  upon  business  and  affirmed  the  constitu- 
tionality of  a  city  ordinance  imposing  a  license  tax  upon 
merchants.  Under  this  ordinance  persons  in  different 
occupations  paid  different  amounts,  and  persons  in  some^ 
occupations  were  classified  by  the  maximum  and  minimum 
amount  of  sales.  It  was  urged  in  this  case  that  the  decision 
in  Masouni?.  The  Bank  was  not  controlling,  as  that  involved 
only  the  State  power  over  inheritances.  But  the  court 
said  that  it  was  decided  in  that  case  that  the  inequality  be- 
tween the  members  of  the  different  classes  did  not  consti- 
tute a  case  of  discrimination  under  the  Fourteenth  Amend- 
ment, that  the  same  principle  controlled  the  case  at  bar, 
and  that  the  equality  between  the  members  of  the  same 
class  was  sufficient  to  satisfy  the  Fourteenth  Amendment. 
It  was  contended  that  the  tax  was  really  a  tax  on  property,  as 
the  final  incidence  of  the  tax  was  on  the  merchant.  But  the 
court  replied  that  "  every  tax  had  its  final  incidence  on  some 
individual,"  and  that  "that  principle  could  not  be  urged  to 
destroy  well  recognized  distinctions."  The  tax  was  on  the 
privilege  of  doing  business  and  regulated  by  the  amount  of 
sales,  and  was  not  repugnant  to  the  Constitution  of  the 
United  States. 

§  45 1 .  Property  taxation  and  inheritance  taxation  distin- 
guished. 

The  principle  of  classification  by  amount  thus  enforced 
in  the  case  of  inheritance  taxation  and  extended  to  license 
taxation,  has  not  been  applied  in  the  case  of  property 
taxation.     The  right  to  be  secure  in  the  possession  of  prop- 

1  Clark  V.  Titusville,  184  U.  S.  329. 


§   451  EQUAL  PROTECTION  OF  THE  LAWS.  587 

erty  when  once  acquired  is  admittedly  distinct  from  the 
right  to  inherit  property,  although  it  must  be  conceded 
that  the  taxation  of  a  business  is  in  effect  and  incidence  a  tax 
upon  the  property  employed  in  the  business.  It  was  argued 
in  the  Magoim  case  that  an  inheritance  tax  is  not  on 
property,  but  on  the  succession,  and  that  the  riglit 
to  take  property  hy  devise  or  descent  is  a  creature  of 
the  law,  not  a  natural  right,  but  "a  privilege.  The  author- 
ity therefore,  which  confers  it,  may  impose  conditions 
upon  the  privilege  thus  granted.  It  was  argued  on  the 
one  side  that  the  State  could  exercise  its  power  to  the 
extent  of  making  itself  the  heir  of  everj^one,  and  on  the 
other  that  there  was  a  natural  right  in  the  children  to  in- 
herit. The  court  did  not  distinctly  pass  upon  these  propo- 
sitions, but  based  its  decision  upon  the  right  of  the  State 
to  make  reasonable  classifications  in  taxation.  Justice 
Brewer  remarked  in  his  dissenting  opinion  that  it  seemed 
to  be  conceded  that,  if  the  tax  was  one  upon  propertj^  the 
progressive  increase  of  the  rate  could  not  be  sustained. 

The  expressions  in  the  opinions  of  the  Supreme  Court, 
already  referred  to,  concerning  the  large  discretion  of  the 
States  in  the  exercise  of  the  taxing  power,  to  vary  the  rates 
or  forms  of  taxation,  clearly  refer  to  discretion  in  the  ad- 
justment of  taxation,  so  as  to  better  approximate  the  equal 
distribution  of  the  public  burdens.  To  avoid  disturbino- 
this  adjustment,  the  court  has  sustained  the  exercise  of  the 
State's  discretion  and  has  been  reluctant  to  disturb  State 
classification  in  inheritance  and  license  taxation.  The  court 
has  also  reiterated  in  these  recent  opinions  the  words  of  Mr. 
Justice  Bradley,  in  the  Bell  Gap  Railroad  case,  that  "  clear 
and  hostile  discriminations  of  an  unusual  character,  unknown 
to  the  practice  of  our  government,  might  be  obnoxious  to 
the  constitutional  prohibition."  ^ 

1  Bell's  Gap  Railroad  Co.  v.  Pennsylvania,  supra,  §  439.  Upon  this  sub- 
ject  of  discriminating  taxation  as  violative  of  the  Fourteenth  Amendment, 
see  Guthrie's  Lectures  on  the  Fourteenth  Amendment,  page  120  et  seq. 


588  EQUAL  PROTECTION  OF  THE  LAWS.  §   452 

The  considerations  which  would  justify  and  even  require 
orraded  classifications  in  taxation  throush  business  licenses, 
such  as  were  sustained  in  Clark  v.  Titusviile,  do  not  exist 
in  ordinary  property  taxation.  The  proportional  burden  of 
fixed  charges  for  the  privilege  of  conducting  business 
diminishes  as  the  volume  of  business  increases,  and  a  bus- 
iness tax,  which  would  be  trifling  in  a  large  business,  would 
be  an  intolerable  burden  in  a  small  one.  Graded  classifica- 
tion therefore,  which  would  be  in  accord  with  usual  prac- 
tice in  inheritance  or  license  taxation,  would,  in  property 
taxation,  be  "of  an  unusual  character"  and  "unknown, 
to  the  practice  of  our  government." 

§  452.  Classification  by  exemption. 

The  right  of  specializing  and  classifying  for  taxation 
obviously  includes  the  right  to  make  reasonable  exemptions 
from  taxation.  Thus  property  maybe  exempted  from  con- 
siderations of  public  policy,  for  example,  that  held  for 
relisious,  educational  and  charitable  uses,  and  that  which 
i»  of  so  little  value  in  proportion  to  the  amount  of  the  tax 
to  be  secured,  that  it  would  not  justify  the  expense  of 
assessment  and  collection.  Certain  exemptions  of  this 
character  are  customary  in  systems  of  taxation,  and  to  these 
the  court  refers  in  the  Bell's  Gap  Eailroadcase,  mpra ,  §  439. 
In  many  States  the  right  of  exemption  is  controlled  b}^  the 
State  constitutions,  which  in  some  cases  limit,  and  in  other 
cases  distinctly  prohibit,  legislative  exemptions.  In  the 
absence  of  such  constitutional  restrictions,  the  right  of  the 
State  to  make  exemptions,  or  contracts  for  exemption,  when 
it  deems  them  expedient  according  to  its  own  public  policy, 
has  been  sustained  by  the  Supreme  Court. 

In  the  taxation  of  occupations,  the  selection  of  those 
which  are  taxed  involves  the  exemption  of  others  which  are 
not ;  but  it  is  obvious  that  the  discretion  of  the  taxing 
power,  in  the  matter  of  its  selection,  cannot  be  reviewed. 


§  452  EQUAL  PROTECTION  OF  THE  LAWS.  589 

Because  the  State  taxes  some  occupations,  it  need  not  tax 
all ;  but  if  it  taxes  any  occupation,  it  must  tax  all  engaged 
therein,  and  it  cannot  make  an  arbitrary  classification  9f 
occupations  to  be  taxed. i 

In  other  words,  reasonable  classification  is  required  in 
making  exemptions  from  taxation.  The  right  to  classify 
here,  as  in  any  other  form,  must  be  distinguished  from 
arbitrary  discrimination.  K  the  limit  of  exemptions, 
$20,000,  fixed  in  the  Illinois  inheritance  tax  laws  sustained 
by  the  Supreme  Court  in  the  Magoun  case,  supra,  §  449, 
should  be  applied  in  property  taxation,  it  would  exempt,  in 
most  communities,  all  but  a  very  few  taxpayers,  and  since 
such  an  exemption  could  only  proceed  from  a  purpose  to 
shift  the  entire  burden  of  government  upon  a  few,  it  would 
be  a  clear  violation  of  the  equality  of  right  guaranteed  by 
the  Federal  Constitution. 

This  distinction  was  illustrated  in  the  United  States  Cir- 
cuit Court  in  North  Dakota,  where  it  was  held,  in  an  opin- 
ion by  Judge  Caldwell,  that  it  was  not  competent  for  the 
State,  either  under  the  organic  act  whereunder  it  was  ad- 
mitted to  the  Union,  or  the  Fourteenth  Amendment,  to 
classify  the  lands  in  the  territory  for  the  purposes  of  taxa- 
tion into  those  owned  by  the  railroad  companies  and  those 
owned  by  all  other  persons,  and  declare  that  the  former 
should  not  and  the  latter  should  be  taxed.  The  prohibition 
in  the  organic  act  against  making  "  any  discrimination  in 
taxing  different  kinds  of  property  "  necessarily  implies  a 
prohibition  against  any  discrimination  in  taxing  the  same 
kind  of  property.  The  court  said,  at  page  686:  "  It  es- 
tablishes the  just  and  reasonable  rule,  which  is  becoming 
fundamental  in  our  American  system  of  taxation,  that  the 
burdens  of  taxation  shall  fall  equally  upon  all  owners  of 
the  same  kind  of  property."  2     In  this  case,  a  corporation 

1  See  Anti-Department  Store  case,  wfra,  §  456. 

2  Northern  Pac.  R.  R.  Co.    u.    Walker,  47  Fed.  Rep,  681.    The  ex- 


590  EQUAL  PROTECTIOX  OF  THE  LAWS/  §   453 

claimed  its  lands  were  exempt,  in  other  words,  claimed  a 
discrimination  in  its  own  favor  against  individuals ;  but  the 
equality  of  right  enforced  by  the  Constitution  applies  to  all 
persons,  corporate  and  individual,  within  the  jurisdiction  of 
the  State. 

But  the  State  may  classify  railroads  for  taxation,  and 
apply  to  them  a  special  method  of  assessment,  e.  g.,  accord- 
ing to  their  gross  earnings,!  as  it  may  exempt  them  frohi 
taxation  altogether,  if  it  deems  wise ;  that  is,  if  it  determines 
that  the  benefit  to  be  derived  from  such  exemption  is  equiva- 
lent to  the  tax  that  would  otherwise  be  exacted,  and  that  the 
property  exempted  is  used  for  the  promotion  of  the  public 
welfare.2  This  determination,  subject  to  the  restriction  of 
the  State  constitution,  is  a  legislative  and  not  a  judicial 
question. 

§  453.  Exemption  for  efficiency  in  taxation. 

An  interesting  illustration  of  the  necessity  of  apparent 
discriminations,  in  adjusting  a  taxing  system  to  modern 
conditions,  is  presented  in  a  Maryland  case.  A  statute  of 
that  State  subjected  to  taxation  bonds  of  a  corporation  held 
by  residents  and  secured  by  mortgage  upon  property  wholly 
within  its  jurisdiction,  but  exempted  mortgages  by  indi- 
viduals and  building  associations,  and  the  non-interest 
bearing  bonds  of  corporations.     It  was  held  by  the  highest 


emption  was  held  violative  of  the  Fourteenth  Amendment,  as  well  as 
of  the  organic  act  of  the  territory. 

1  Northern  Pac.  R.  R.  Co.  v.  Barnes,  2  N.  Dak.  310. 

2  See  Northern  Pac.  R.  R.  Co.  v.  Garland,  5  Mont.  126.  It  was  held, 
in  South  Dakota,  In  re  Assessment,  4  So.  Dak.  6,  that  under  the  State 
constitution  requiring  uniformity  and  equality  in  taxation,  an  act  per- 
mitting the  deduction  of  debts  from  the  amount  of  credits  and  personal 
property,  while  making  no  deduction  from  the  value  of  real  estate,  was 
invalid,  and  also  invalid  in  that  it  prohibited  deductions  of  debts 
within  the  State,  bat  not  of  debts  without  the  State. 


§  454        EQUAL  PROTECTION  OF  THE  LAWS.  591 

court  of  the  State  i  that  these  were  not  arbitrary  discrim- 
inations, but  valid  under  the  Constitution  of  the  State  and 
under  the  Fourteenth  Amendment.  The  State  was  not 
obhged  to  tax  every  form  of  property.  An  individual's 
true  wealth,  for  the  purposes  of  taxation,  consists  of  his 
real  and  persoual  property,  but  in  the  case  of  a  corporation, 
its  franchises,  its  borrowing  power,  its  earning  power,  its 
real  wealth,  are  not  represented  merely  by  its  visible  prop- 
erty and  shares  of  stock.  Its  taxable  value  is  its  bonded 
indebtedness  together  with  its  stock.2  There  was  reason 
therefore  for  the  exemption.  The  exemption  of  non-in- 
terest bearing  bonds  is  not  arbitrary,  but  based  upon  sound 
reasoning,  as  the  true  test  of  a  taxable  value  is  the  produc- 
ino-  value  to  the  owner.  The  court  held  that  these  are  dis- 
criminations  which  the  best  interests  of  society  require, 
within  the  principle  laid  down  by  the  Supreme  Court  in 
the  Bell's  Gap  Eailroad  case.^ 

§  454.  Conditions  which  warrant  classification. 

The  conditions  of  which  the  courts  take  notice  as  war- 
rantins:  classification  for  taxation  are  illustrated  in  a  Penn- 
sylvania  case,*  where  it  was  held  by  the  Supreme  Court  of 
that  State  that  a  constitutional  requirement  of  uniformity 
upon  the  same  class  of  subjects  was  not  violated  by  a 
statute,  which  made  all  interest  bearing  indebtedness  of 
private  corporations  a  separate  class  for  the  purposes  of 
taxation,  and  required  assessment  upon  their  nominal  value, 

1  Simpson  v.  Hopkins,  82  Mti.  478. 

2  Citing  Mr.  Justice  Miller  in  the  Illinois  railroad  tax  cases,  supra, 
§240. 

3  The  report  of  this  case  is  interesting  as  showing  the  relation  of  law 
to  economics  on  this  subject,  as  briefs  of  counsel  cite  such  economic 
authorities  as  Professor  Seligman  and  David  A.  Wells. 

4  Commonwealth  of  Pennsylvania  v.  Delaware  Division  Canal  Co., 
123  Pa.  594,  2  L.  R.  A.  798. 


592  EQUAL  PROTECTION  OF  THE  LAWS.         §  455 

while  all  mortgages  and  money  paid  by  solvent  debtors, 
eto.,  were  taxable  at  a  certain  rate  upon  their  value.  The 
court  said  this  classification  was  justified  hy  the  peculiar 
nature  of  corporate  securities,  the  great  fluctuations  in 
their  value  and  the  difficulty  of  reaching  them  by  a  general 
system  of  .taxation.  Classificatiou  should  be  made  accord- 
ing to  some  reasonable  practical  rule  drawn  from  experi- 
ence J  which  would  prevent  a  gross  inequality  in  the  burdens 
of  taxation.  Absolute  equality  is,  of  course,  unattainable ; 
a  mere  approximate  equality  is  all  that  can  reasonably  be 
expected.  The  mere  diversity  in  the  methods  of  assess- 
ment and  collection,  however  if  these  methods  are  pro- 
vided by  general  law,  violates  no  rule  of  right,  if  when 
these  methods  are  applied  the  results  are  practically  uni- 
form. If  there  is  a  substantial  uniformity,  however  dif- 
ferent the  procedure,  there  is  a  compliance  with  the  con- 
stitutional provision;  even  when  there  may  be  some 
disparity  of  results,  if  uniformity  is  the  purpose  of  the 
legislature,  there  is  a  substantial  compliance. 

Classification  for  taxation  is  not  necessarily  based  upon 
any  essential  difference  in  the  nature  or  condition  of  the 
various  subjects.  It  maj''  be  based  as  well  upon  the  want  of 
adaptability  to  the  same  methods  of  taxation,  or  upon  the 
impracticability  of  apphdng  to  the  various  subjects  the 
same  methods  so  as  to  produce  just  and  uniform  results,  or  it 
mav  be  based  upon  just  and  well  grounded  considerations  of 
public  policy. 

§  455.  Constitutional  amendment  held  unconstitutional. 

.  While  classification  may  thus  be  based  upon  differences 
in  the  nature  or  condition  of  the  subjects  of  taxation,  or 
their  want  of  adaptability  to  the  same  methods  of  taxation, 
it  must  rest  on  some  other  reason  than  that  of  mere  owner- 
ship. Thus  it  was  held  in  Missouri,  in  a  notable  case, 
that  while  property  owned  and  used  by  a  railroad  company 


§   455  EQtTAL  PROTECTION  OF  THE  LAWS.  593 

in  its  equipment  as  a  common  carrier  can  probably  be 
separately  classed  for  taxation,  a  discrimination  excepting 
all  property  of  every  description  owned  by  any  quasi  piil?- 
lic  corporation  and  resting  upon  no  other  reason  than  that 
of  mere  ownershii3  is  a  discrimination  violative  of  the 
Fourteenth  Amendment. i  The  case  is  an  interesting  one, 
as  it  involved  the  decision  that  a  constitutional  amendment 
adopted  in  that  State  for  the  taxation  of  mortgages  was 
invalid.  The  amendment  was  substantially  copied  from 
the  California  constitution  and  was  adopted  at  the  general 
election  in  November,  1900.  It  provided  that  a  mortgage 
should  be  taxable  as  an  interest  in  the  property  affected 
thereby,  "  except  as  to  railroads  and  other  quasi  public 
corporations  for  which  provision  has  already  been  made 
by  law." 

This  method  of  taxing  mortgages  had  been  held  not 
violative  of  the  Constitution  of  .the  United  States  in  Savinsfs 
Society  v.  Multnomah  County,  a  case  from  Washington. ^ 
The  exception  of  railroads  and  other  quasi  public  corpo- 
rations from  the  provisions  of  the  act  was  held  by  Jus- 
tices Field  and  Sawyer  in  the  United  States  Circuit  Court 
in  the  case  of  the  Southern  Pacific  Railroad  Company  ^ 
to  be  an  unlawful  discrimination,  but  it  was  suggested  by 
Mr.  Justice  Field  in  his  opinion,^  that  the  constitutional 
provision  of  California  could  be  sustained  by  eliminating 
the  exception.  The  judgment  in  this  case  invalidating 
the  assessment  complained  of  was  affirmed  by  the  Supreme 
Court^  on  another  ground,  and  the  point  in  question  has 
never  been  decided  by  that  court,  although  it  has  upheld, 

1  Rnssell  v.  Croy,  164  Mo.  69,  opinion  by  Valliant,  J.,  three  judges 
dissenting. 

2  Supra,  §  401. 

2  Supra,  §  310  eJ  seq. 
*  See  page  414. 
5  118  U.  S.  394. 


38 


594  EQUAL  PROTECTION  OF  THE  LAWS.  §   455 

as  stated,  the  power  of  the  States  to  tax  mortgages  as  real 
estate. 

The  court  said  that  the  discrimination  in  excepting  rail- 
road and  other  quasi  public  corporations  was  not  in  accord 
with  the  uniformity  and  equality  in  taxation  required  by 
the  State  constitution,  but  that,  of  course,  that  was  no 
legal  objection  to  its  validity  as  a  constitutional  amendment, 
"  as  the  very  purpose  of  the  amendment  is  to  make  some 
change  in  the  original."  But  it  was  also  violative  of  the 
equal  protection  of  the  laws  secured  by  the  Fourteenth 
Amendment. 

It  was  admitted  that  the  State  could  classify  property  for 
taxation,  but  it  was  said  that  the  classification  must  rest  on 
some  reason  other  than  mere  ownership,  and  that  different 
pieces  of  property  of  the  same  kind  held  or  used  for  the 
same  purposes  within  the  same  jurisdiction  could  not  law- 
fully be  so  classified,  as  that  one  is  subject  to  the  tax  and 
the  other  exempt,  merely  because  one  belongs  to  a  natural 
person  and  the  other  to  a  corporation,  or  that  one  is  the 
obligation  of  a  corporation  and  the  other  that  of  a  natural 
person,  or  one  that  of  a  large  concern  and  the  other  that 
of  a  small  one.  The  words  of  the  exception  were  applicable 
to  all  mortgaged  property  of  every  class  owned  by  rail- 
roads or  other  quasi  public  corporations,  and  the  discrim- 
ination put  mortgage  securities  issued  by  these  corporations 
in  a  position  of  advantage  over  such  securities  made  by 
individuals,  so  that  the  money  lender  could  afford  to  lend 
his  money  to  a  quasi  public  corporation  at  a  less  rate  of 
interest  than  to  others.  The  court  also  cited  and  quoted 
from  the  opinion  of  the  United  States  Circuit  Court  in  the 
Northern  Pacific  Railroad  case,i  and  the  opinion  of  Mr. 
Justice  Field  in  the  Southern  Pacific  Railroad  case,  also 
from  Mr.  Guthrie  on  the  Fourteenth  Amendment,  as  follows  :2 

1  Supra,  §  452. 

2  Pp.  117,  118. 


§  456  EQUAL  protectiOjST  of  the  laws.  595 

"  Indeed,  in  one  of  the  early  cases,  the  extreme  state- 
ment was  made  that  '  the  Federal  Constitution  imposes  no 
restraints  on  the  States  '  in  regard  to  unequal  taxation.!  If 
this  language  means  that  the  amendment  does  not  prohibit 
legitimate  classification,  and  that  it  does  not  require  all 
kinds  of  property  to  be  taxed  at  the  same  rate,  the  state- 
ment is  correct.  Certain  kinds  of  property  and  certain 
classes  of  persons  can  be  singled  out  for  taxation,  even 
though  this  may  result  in  exempting  other  propert}'^  and 
other  classes  from  any  tax  burden.  But  the  statement  is 
too  broad,  and  is  misleading.  Unequal  taxes  may  not  be 
imposed  upon  property  of  the  same  kind,  in  the  same  con- 
dition and  used  for  the  same  purposes.  '  Equality  is  of 
the  very  essence  of  the  taxing  power  itself.'  The  Four- 
teenth Amendment  does  impose  a  practical  and  effective  re- 
straint against  such  taxes." 

The  constitutional  amendment  was  therefore  declared 
void, 2  as  violative  of  the  Fourteenth  Amendment. 

§  456.  Anti  Department  Store  Act  held  unconstitutional. 

Another  decision  of  the  Supreme  Court  of  Missouri  de- 
clared invalid  another  example  of  illegitimate  classification 
for  taxation. 3  This  act  imposed  a  license  of  not  less  than 
$300  nor  more  than  $500  for  each  of  the  classes  or  groups 
of  goods  sold  by  each  merchant  employing  more  than  fifteen 
persons.  It  was  declared  invalid  on  other  grounds,  but  also 
because  it  was  unwarranted  class  legislation,  violative  of  the 
natural  rights  of  the  citizen.  The  court  based  its  decision 
principally  upon  the  provisions  of  the  Missouri  Bill  of  Rights, 
that  all  persons  have  a  natural  right  to  life,  liberty  and  the 

1  Justice  Miller  in  Davidson  v.  New  Orleans,  Supra,  §  360. 

2  For  decision  of  the  United  States  Circuit  Court  of  Oregon  in  rela- 
tion to  the  same  system  of  taxing  mortgages,  see  Dundee  Mortgage  & 
Trust  Co.  V.  Parrish,  24  Fed.  Rep.  197. 

3  State  ex  rel.  v.  Ashbrook,  loi  Mo.  375. 


596  EQUAL  PROTECTION  OF  THE  LAWS.        §  457 

enjoyment  of  the  gains  of  their  industry,  and  that  no  person 
shall  be  deprived  of  life,  liberty  or  property  without  due 
process  of  law,  and  said  that  the  classification  in  the  act  was 
wholly  without  reason  or  necessity,  and  was  truly  "classifi- 
cation run  wild."  The  court  said  "  to  have  made  the  act 
apply  to  all  merchants  of  a  given  avoirdupois  or  to  those 
employing  clerks  of  a  designated  stature,  or  to  those  doing 
business  in  buildings  of  a  special  architectural  design,  would 
have  been  as  natural  and  as  reasonable  a  classification  for 
the  purpose  in  view,  as  the  classification  made  by  this  act.  " 

§  457.  Taxation  of  employers  of    foreign    born   persons 
held  invalid. 

Both  the  Supreme  Court  of  Pennsylvania  and  the  United 
States  Circuit  Court  in  that  State  held  invalid  an  act  of  its 
legislature,  imposing  on  employers  of  foreign  born  unnatur- 
alized male  persons  over  twenty-one  years  of  age  a  tax  of 
three  cents  a  day  for  each  day  that  each  of  such  persons 
should  be  employed,  and  authorizing  the  deduction  of  that 
sum  from  their  wages.  It  was  held  by  both  tribunals  that 
this  act  deprived  the  employees  of  the  equal  protection  of 
the  laws,  in  violation  of  the  Fourteenth  Amendment.i 
The  former  court  said,  and  its  language  was  quoted  by  the 
latter :  "It  is  idle  to  suggest  that  the  case  in  hand  is  one  of 
proper  legislative  classification.  A  valid  classification  for 
the  purposes  of  taxation  must  have  a  just  and  reasonable 
basis  for  taxation,  which  is  lacking  here.  The  tax  is  of 
an  unusual  character  and  is  directed  against  and  confined 
to  a  particular  class  of  persons.  Evidently  the  act  is 
intended  to  hinder  the  employment  of  foreign-born,  un- 
naturalized persons  over  twenty-one  years  of  age.  The 
act  is  hostile  to  and  discriminates  against  such  persons. 

1  Fraser  v.  McConway,  82  Fed.  Rep.  257;  Juniata  Limestone.  Co.  v. 
Fagley,  187  Pa.  St.  193,  42  L.  R.  A.  442. 


§  458  EQUAL  PROTECTION  OF  THE  LAWS.  597 

It  interposes  to  the  pursuit  by  them  of  their  lawful  avoca- 
tion, obstacles  to  which  others  in  like  circumstances  are 
not  subjected.  It  imposes  upon  those  persons  burdens, 
which  are  not  laid  upon  others  in  the  same  calling  and 
condition.  The  tax  is  an  arbitrary  deduction  from  the 
daily  wages  of  a  particular  class  of  persons.  The  equal 
protection  of  the  laws  declared  by  the  Fourteenth  Amend- 
ment to  the  Constitution,  secures  to  each  person  within  the 
jurisdiction  of  a  State  exemption  from  any  burdens  or 
charges  other  than  such  as  are  equally  laid  upon  all  others 
under  like  circumstances." 

The  Supreme  Court  of  Pennsylvania  held  that  tho  act 
was  not  only  violative  of  the  Federal  Constitution,  but  also 
of  the  State  constitution,  which  provided  that  all  taxes 
should  be  uniform  upon  the  same  class  of  subjects. 

§  458.  Discriminations  between  residents  and  non-resi- 
dents. 

Any  form  of  discrimination  in  taxation  in  favor  of 
residents  and  against  non-residents  is  void,  not  only  on  the 
ground  already  considered,!  that  such  discrimination  is  an 
interference  with  interstate  commerce  and  violates  the 
privileges  and  immunities  of  citizens  of  other  States, 2  but 
on  the  further  ground  that  such  classification  in  taxation  is 
unreasonable  and  violative  of  equality  and  uniformity,  and 
of  the  equal  protection  of  the  laws. 

In  a  Vermont  case ,3  this  principle  was  applied  to  a 
discrimination  in  favor  of  non-residents,  that  is,  of  goods 
not  manufactured  in  the  State. 

1  Supra,  Chapter  IV. 

2  See  Beesoa  v.  Johns,  124  U.  S.  56.  The  discrimination  in  this  case 
was  claimed  to  violate  the  ordinance  of  1787,  and  the  act  of  admission 
of  Iowa  into  the  Union  (as  to  these  claims  see  §  191,  supra).  The  court 
held  that  the  evidence  did  not  show  any  discrimination  against  non- 
residents as  such. 

8  State  V.  Hoyt,  71  Vt.  59. 


598  EQUAL  PROTECTION  OF  THE  LAWS.  §  458 

The  statute  which  imposed  a  tax  upon  peddlers  selling 
goods,  which  were  the  manufacture  of  the  State,  was  held 
to  effect  a  discrimination  in  favor  of  foreign  goods  and  to 
be  therefore  a  denial  to  persons  "  within  its  jurisdiction  of 
the  equal  protection  of  the  laws."  The  court  said  that  the 
question  was  one  of  classification,  and  that  it  must  appear 
in  every  such  case  that  the  classification  is  based  on  some 
reasonable  ground,  some  difference  which  bears  a  just  and 
proper  relation  to  the  attempted  classification,  and  not  a 
mere  arbitrary  selection. i  Applying  this  rule,  there  was 
no  sufiicient  ground  in  this  case.  "  It  cannot  be  based 
on  any  difference  in  the  goods  themselves,  for  they  are 
precisely  alike;  nor  on  the  fact  that  they  were  made  in 
different  States,  for  that  bears  no  just  and  proper  rela- 
tion to  a  classification,  but  is  purely  arbitrary.  It  cannot 
be  based  on  public  policy ;  for  it  is  not  reasonable  to  say 
that  it  is  for  our  interest  to  encourage  the  introduction 
and  sale  of  the  goods  of  the  non-resident  manufacturer, 
when  thereby  the  manufacture  and  sale  of  the  goods  of  the 
resident  manufacturer  would  be  discouraged,  and  perhaps 
prevented  altogether.  Nor  can  it  be  based  on  the  differ- 
ence of  residence  of  the  manufacturers ;  for  that,  as  in  case 
of  the  goods,  would  be  purel}^  arbitrarj^,  and,  besides,  would 
allow  a  State  to  discriminate  against  its  own  citizens  in 
favor  of  the  citizens  of  other  States  which  it  cannot  do  any 
more  than  it  can  discriminate  in  favor  of  its  own  citizens 
against  the  citizens  of  other  States,  for  the  equality  clause 
of  said  amendment  includes  everybody.  No  State  shall 
'  deny  to  any  person  within  its  jurisdiction  the  equal  pro- 
tection of  the  laws  '  is  its  language,  and  its  universality  of 
inclusion  has  been  often  adjudged.     Yick  Wo  v.  Hopkins, 

1  It  was  held  in  Cribbs  v.  Benedict,  64  Ark.  555,  tliat  the  difference  in 
manner  of  enforcement  of  a  ditch  tax,  between  residents  and  non-resi- 
dents, the  tax  being  the  same  in  amount  and  a  lien  on  the  land  in  both 
cases,  was  not  an  unreasonable  discrimination. 


§  459        EQUAL  PROTECTION  OF  THE  LAWS.  599 

118  U.  S.  356,  369.  If  a  classification  can  be  based  on 
none  of  these  grounds,  we  see  no  ground  on  which  it  can 
be  based."  1   • 

§  459.   Illegal  discrimination  in  license  taxation. 

While  the  State  may  classify  for  the  purposes  of  license 
taxation,  that  is,  taxation  upon  business  or  occupations, 
and  may  thus  tax  one  business  without  taxing  another,  it 
cannot  make  a  classification  which  is  arbitrary  and  has  no 
just  and  reasonable  basis.     This  was  illustrated  in  the  Anti- 
Department  Store  Case,  s^i^ra,  §  456.    Where  a  license  tax  is 
imposed  upon  those  of  a  certain  business,  it  must  be  levied 
without  discrimination  upon  all  engaged  therein,  within  the 
authority  levying  the  tax.     This  is  essential  in  order  that 
the  tax  may  be  equal  and  uniform  as  required  by  the  State 
constitutions,  as  well  as  under  the  provision  for  equal  pro- 
tection   of   the   laws.     In   the   language  of  the  Supreme 
Court  in  the  Illinois  inheritance  tax  case,  supra,  §449  the 
rule  (of  the  Fourteenth  Amendment),  is  not  a  substitute  for 
municipal  law;    it  only  prescril^es  that  the  law  have  the 
attribute  of  equality  of  operation,  and  equality  of  opera- 

1  In  Gilman  v.  Sheboygan,  2  Black  510,  the  court  followed  the  Su- 
preme Court  of  Wisconsin,  holding  that  under  the  constitution  of  that 
State  a  tax  upon  «'  all  the  real  estate  "  of  the  city  for  the  payment  of  a 
railroad  subscription  was  an  illegal  discrimination,  there  being  some 
three  or  four  hundred  thousand  dollars  of  personal  property  m  the  city 
subiect  to  taxation. 

For  other  illustrations  of  classifications  adjudged  illegal,  see  State  v. 
Hubbard,  12  Ohio  Dec.  87,  holding  that  taxation  of  teachers  as  a  class 
of  citizens,  for  the  purpose  of  raising  a  Teachers' Pension  Fund  was 
void  An  act  dividing  the  counties  of  the  State  into  classes  and  the 
lands  thereof  into  sub-classes  according  to  quality,  fixing  a  maximum 
and  minimum  value  for  taxation  of  the  lands  in  the  several  classes,  and 
confining  the  assessor  to  the  limits  so  fixed,  was  held  violative  of  uni- 
formity and  equality  in  taxation.  Hawkins  v.  Mangura,78Miss.97.  Also 
State  V.  Benzenberg,  101  Wis.  172;  State  v.  Gardner  COhio),  51  N.  E. 
136;  Walsh  V.  Denver,  11  Colo.  App.  523;  State  v.  WilUngham  (Wyo.), 
62  Pac.  Rep.  797,  9  Wyoming  290. 


600  EQUAL  PROTECTION  OF  THE  LAWS.  §   459 

tion  does  not  mean  indiscriminate  operation  on  persons  as 
such,  but  on  persons  according  to  tlieir  relations.  In  some 
circumstances  it  cannot  tax  A  more  than  B,  but  if  A  be  of 
a  different  trade  or  profession  than  B,  it  may. 

In  North  Carolina  a  license  of  a  thousand  dollars  charged 
upon  the  occupation  of  an  emigrant  agent,  unaccompanied 
by  any  police  regulation,  was  held  void  as  violative  of  the 
principle  of  uniformity,  which,  under  the  constitution  of 
that  State,  prohibited  any  discriminating  tax  upon  per- 
sons j)ursuing  the  same  vocation.  The  decision  was  based 
upon  the  ground  that  there  was  no  regulation  prescribed 
in  the  act,  and  that  it  was  an  arbitrary  and  unreasonable 
exercise  of  the  taxing  power. i 

Reasonable  classifications  for  taxation  however,  such  as 
between  wholesale  and  retail  merchants,^  between  manu- 
facturing and  quasi  public  corporations  and  other  corpora- 
tions,^ between  gas  companiejs  and  other  manufacturing 
companies j'i  have  been  sustained,  as  also,  in  numerous 
cases,  have  license  charges  upon  all  those  engaged  in  a  cer- 
tain business.  But  on  the  other  hand,  discriminations 
between  members  of  the  same  natural  class  have  been  uni- 
formly condemned.  Thus  discriminations  between  commis- 
sion merchants  and  produce  dealers ,5  in  license  taxation  ac- 
cording to  the  residence  of  a  party  ,6  and  between  merchants 
doing  business  in  different  parts  of  a  city,'^  have  been  held 
void  as  violative  of  the  principle  of  uniformity  and  equality, 

1  North  Carolina  v.  Moore,  113  N.  Car.  697,  and  22  L.  R.  A.  472.  The 
act  also  lacked  uniformity  In  that  it  expressly  excluded  from  its  opera- 
tion all  counties  lying  west  of  a  certain  line. 

2  Commonwealths.  Clark,  195  Pa.  St.  634. 

3  Carroll  v.  Alsup  (Tenn  ),  64  S.  W.  Rep.  193.  See  also  Common- 
wealth V.  Edgerton  Coal  Co.,  164  Pa.  St.  284. 

4  Williams  v.  Reese,  2  Fed.  Rep.  882. 

5  Ktinsas  City  v.  Grush,  151  Mo.  128. 

6  St.  Louis  V.  Consolidated  Coal  Co.,  113  Mo.  83. 

'  St.  Louis  V.  Spiegel,  75  Mo.  145;  St.  Louis  v.  Spiegel,  90  Mo.  687. 


§   459  EQUAL  PROTECTIOX  OF  THE  LAWS,  601 

as  between  members  of  the  same  natm-al  class.  A  poll 
tax,  exempting  persons  who  had  voted  at  the  last  elec- 
tion, was  held  an  unreasonable  classification  and  void.i 
A  peddler's  license  tax,  exempting  persons,  who  had 
served  in  the  army  or  navy,  was  also  held  void. 2 

But  the  Fourteenth  Amendment,  while  securing  to  all 
persons  in  the  pursuit  of  a  lawful  business  the  equal  pro- 
tection of  the  laws,  is  not  to  be  construed  as  restricting  the 
State  in  the  exercise  of  its  power  to  charge  its  citizens 
with  the  burdens  of  taxation,  differing  in  their  imposition 
accordino-  to  the  manner  in  which  the  avocation  of  the 
citizen  touches  and  concerns  the  public  interests.  Thus, 
in  New  York,  a  license  fee  upon  the  entire  class  of  persons 
actins  within  the  State  as  agents  for  associations  of 
individual  fire  underwriters  not  incorporated  under  the 
laws  of  the  State,  while  the  agents  of  domestic  fire  insur- 
ance corporations  were  not  subject  thereto,  was  held  not 
to  involve  the  unequal  application  of  a  tax,^ 

The  regulation  of  the  liquor  trafiic,  or  of  any  other  calling 
or  business  which  is  of  such  a  nature  that  it  may  fairly  be 
deemed  to  be  subject  to  police  prohibition  or  regulation, 
obviously  rests  on  different  grounds,  and  the  same  State 
law  may  authorize  both  regulation  and  ta-xation.'^ 

Thus  the  statute  of  Texas,  requiring  a  license  and 
bond  and  the  payment  of  an  occupation  tax  as  conditions  of 
the  right  to  sell  liquors,  was  sustained  by  the  Supreme 
Court,  although  there  was  no  such  requirement  as  to  any 
other  occupation. 5     The  court  said  the  statute  affected  all 

1  Kansas  City  v.  Whipple,  136  Mo.  475. 

2  State  V.  Garbrouski,  111  Iowa  496. 

3  Fire  Department  of  New  York  City  v.  Stanton,  159  N.  Y.  225;  see 
also  State  v.  Freucb,  17  Mont.  5t;  Hayes  u.  Commonwealth,  55  S  W. 
Rep.  425;  Kinsley  v.  Cottrell,  196  Pa.  St.  614;  Singer  Manufacturing 
Co.  V.  Wright,  33  Fed.  Rep.  121. 

4  Guntlling  v.  Chicago,  si<;)m,'§  412.^ 
8  Giozzi  y.  Tiernan,  148  U.  S.  657. 


602  EQUAL  PROTECTION  OF  THE  LAWS.  §  460 

persons  in  Texas  engaged  in  the  sale  of  liquors,  exacted 
compliance  in  the  same  manner  and  to  the  same  degree, 
and  did  not  therefore  violate  the  Fourteenth  Amendment. i 

§  460.  Discrimination  in  expenditure  of  public  funds. 

The  equal  protection  of  the  laws  under  the  Fourteenth 
Amendment  prohibits  unjust  discrimination  not  only  in 
taxation,  but  also  in  the  expenditure  of  the  proceeds  of 
taxation.  It  is  obvious  however  that  a  very  clear  case 
must  be  presented,  to  justify  the  judiciary  in  interfering 
with  the  very  large  discretion  which  is  reposed  in  the  legis- 
lative department  in  expending,  under  the  limitations  of 
the  State  constitution,  the  public  funds  for  the  public 
needs. 

This  principle  was  applied  by  the  United  States  Circuit 
Court  in  Kentucky,  in  granting  an  injunction  against  a 
Board  of  Trustees  of  Public  Schools,  in  behalf  of  certain 
colored  citizens,  on  the  ground  of  discrimination  in  the 
distribution  of  school  funds. ^  The  act  of  the  legislature 
authorized  the  municipality  to  levy  a  tax  for  the  benefit  of 
the  public  schools  witttin  its  limits,  but  directed  that  the 
taxes  collected  from  the  white  people  should  be  used  to 
sustain  the  schools  for  white  children  only,  and  that  those 
collected  from  the  colored  people  should  go  to  support  the " 
schools  for  the  colored  children.  The  effect  of  this  dis- 
crimination was  to  give  to  the  whites  excellent  school 
facilities  and  a  school  session  annually  of  nine  months, 
and  to  the  colored  children  inferior  school  facilities  and  an 
annual  session  of  only  three  months.  The  court  said  that 
this  was  a  discrimination  under  State  authority  constituting 
a  denial  of  the  equal  protection  of  the  laws.     In  answer  to 

1  See  also  Humes  v.  Ft,  Smith,  93  Fed.  Rep.  857,  from  Arkansas; 
Daniels  v.  State,  150  lad.  348;  Strouse  ??.  Galesburg,  89  111.  App.  504; 
In  re  Eberly,  98  Fed,  Rep.  295. 

2  Claybrook  v.  Cily  of  Oweasboro,  16  Fed.  Rep.  297. 


§   460  EQUAL  PROTECTION  OF  THE  LAWS.  603 

the  argument  that  the  equal  protection  does  not  mean  the 
equal  benefit  of  the  laws,  the  Court  said  that  on  that  basis 
the  State  could  apply  taxes  not  only  according  to  color, 
but  also  according  to  the  nativity  of  citizens,  and  that  a 
division  might  be  made  limiting  "the  benefit  and  distribut- 
ing the  protection  of  the  laws  according  to  the  taxes  paid 
and  the  wealth  of  the  taxpayer.  This  would  entirely 
ignore  the  spirit  of  our  republican  institutions.  The  court 
added  at  page  302  :  — 

"The  equal  protection  of  the  laws  guarantied  by  this 
amendment  must  and  can  only  mean  that  the  laws  of  the 
States  must  be  equal  in  their  benefit  as  well  as  equal  in  their 
burdens,  and  that  less  would  not  be  the  equal  protection  of 
the  laws.  This  does  not  mean  absolute  equality  in  distrib- 
uting the  benefits  of  taxation.  This  is  impracticable ;  but 
it  does  mean  the  distribution  of  the  benefits  upon  some  fair 
and  equal  classification  or  basis."  The  court  quoted  the 
language  of  the  Supreme  Court  of  Calif  ornia :  i  "  '  To  de- 
clare, then,  that  each  person  within  the  jurisdiction  of  the 
State  shall  enjoy  the  equal  protection  of  its  laws,  is  neces- 
sarily to  declare  that  the  measure  of  legal  rights  within  the 
State  shall  be  equal  and  uniform,  and  the  same  for  all  per- 
sons found  therein,  according  to  the  respective  conditions 
of  each  —  each  child  as  to  all  other  children,  each  adult 
person  as  to  all  other  adult  persons.'  " 

On  final  hearing  of  this  case,2  it  was  held  that  the  court 
had  no  power  to  issue  a  mandatory  injunction,  requirino-  the 
distribution  of  the  money  raised  by  taxation  for  public 
schools  regardless  of  the  discriminations  prescribed  by  the 
act,  and  could  only  enjoin  persons  from  acting  under 
authoritv  of  the  act. 


1  la  Ward  v.  Flood,  48  Cal.  51. 

2  23  Fed.  Rep.  634. 


604         EQUAL  PROTECTION  OF  THE  LAWS.        §  461 

§  461.  Discriminatiou  between  races   in  expenditure  of 
school  funds. 

The  same  question  came  before  the  Supreme  Court  of  the 
United  States  in  another  case  presenting  a  materially  differ- 
ent question.  The  Board  of  Education  in  Richmond  County, 
Georgia,  suspended  the  high  school  for  negroes,  but  con- 
tinued to  maintain  one  for  white  children.  Suit  was  brought 
to  compel  the  closing  of  the  high  school  for  the  whites,  on 
the  ground  that  its  maintenance  when  the  other  was  closed 
was  a  discrimination  against  the  colored  race  in  violation 
of  the  rights  secured  to  them  under  the  Fourteenth  Amend- 
ment.  The  constitution  of  Georgia  provided  for  free  and 
separate  schools.  The  State  court  did  not  deem  the  action 
of  the  board  in  suspending  temporarily  and  for  economic 
reasons  the  high  school  for  the  colored  children  a  sufficient 
reason  for  closing  that  for  the  whites,  and  said  there  was 
no  evidence  that  the  board  had  acted  in  bad  faith,  or  that 
it  had  abused  its  discretion.!  The  Supreme  Court  said 
that  under  the  circumstances  it  could  not  see  that  this 
action  of  the  State  court  was,  within  the  meaning  of  the 
Fourteenth  Amendment,  a  denial  of  the  equal  protection 
of  the  laws  to  plaintiffs;   adding  that    "while    all   admit 

1  Gumming  v.  Board  of  Education,  175  U.  S.  638.  Held,  by  the  New 
York  Ct.  of  App.,  93  N.  Y.  438,  People  ex  rel.  v.  Gallagher,  that  separate 
public  schools  being  provided  for  colored  children,  such  children  may 
be  excluded  from  those  provided  for  white  (Children,  and  that  this  in- 
volved no  denial  of  rights  under  the  Fourteenth  Amendment.  Attention 
was  called  to  the  fact  that  Congress  had  established  exclusive  schools 
for  the  education  of  the  colored  race  in  the  District  of  Columbia,  The 
amendment  was  not  intended  to  have  any  other  effect  than  to  give  to  all, 
without  respect  to  color,  age  or  sex,  the  same  legal  rights  and  the  uniform 
protection  of  the  same  laws. 

Held,  in  North  Carolina,  Markham  v.  Manning,  96  N.  C.  132,  that  a  law 
which  directed  that  the  funds  raised  by  taxation  from  the  property  of 
whites  should  be  devoted  to  the  schools  of  white  children,  and  those 
raised  from  the  property  of  negroes  should  be  devoted  to  schools  for 
negroes,  was  unconstitutional  and  void.  See  United  States  v.  Buntin,  10 
Fed.  Rep.  730  and  cases  cited  in  note. 


§  461  EQUAL  PROTECTION  OF  THE  LAWS.  605 

that  the  benefits  .  and  burdens  of  public  taxation  must  be 
shared  by  citizens  without  discrimination  against  any  class 
on  account  of  their  race,  the  education  of  the  people  in  the 
schools  maintained  by  State  taxation  is  a  matter  belonging 
to  the  respective  States,  and  any  interference  on  the  part 
of  the  Federal  authority  with  the  management  of  such 
schools  cannot  be  justified  except  in  the  case  of  a  clear  and 
unmistakable  disregard  of  rights  secured  by  the  supreme 
law  of  the  land." 

It  seems  that  in  this  case  the  board  had  not  established 
a  high  school  for  white  boys,  but  only  for  white  girls. 
The  court  said  that  the  colored  school  children  of  the 
county  would  not  be  advanced  in  the  matter  of  their  edu- 
cation by  a  decree  compelling  the  board  to  cease  giving 
support  to  the  white  high  school,  that  its  decision  was  in 
the  interest  of  the  greater  number  of  the  colored  children 
who  attended  the  primary  schools,  and  that  the  small 
number  wanting  a  high  school  education  could  obtain  it  in 
the  existing  private  institutions  at  an  expense  not  beyond 
that  incurred  in  the  high  school  discontinued  by  the  board. 

In  a  Kansas  case,i  ^n  act  providing  for  the  levy  of  a  fire 
tax  which  excluded  the  property  of  railroad  companies, 
whereon  the  tax  was  levied,  from  the  benefit  and  protection 
of  the  proceeds  thereof,  was  held  invahd,  the  court 
saying :  — 

"  As  some  of  the  taxpayers  appear  to  have  been  pur- 
posely excluded  from  the  benefit  and  protection  of  the  law, 
the  tax,  therefore,  lacks  that  equality  and  uniformity  es- 
sential to  its  validity.  It  is  a  discrimination  against  one 
taxpayer  in  favor  of  others,  and  is  a  denial  of  the  equal 
protection  of  the  law  required  by  both  State  and  Federal 
constitutions.  Absolute  equality  in  taxation  is,  of  course, 
unattainable,  but  a  law,  the  manifest  purpose  and  legitimate 

1  A.  T.  &  S.  F.  R.  Co.  V.  Clark,  60  Kansas  826. 


606  _         EQUAL  PROTECTION  OF  THE  LAWS.  §   462 

result  of  which  is  discrimination  and  inequality,  cannot  be 
sustained." 


§  462.  Federal  and  State  guaranties  of  eqiial  taxation. 

The  Fourteenth  Amendment  in  this  guaranty  of  the  equal 
protection  of  the  laws  confers  no  right,  except  that  of  in- 
voking the  Federal  power  against  illegal  discriminations 
under  State  authority.  Equal  protection  of  the  laws  as 
construed  by  the  Supreme  Court  does  not  require  an  iron 
rule  of  equality  in  taxation,  but  does  require  that  uniform- 
ity and  equality  as  to  the  same  class  of  subjects  by  due 
apportionment  which  are  inherent  in  taxation,  as  distin- 
guished from  arbitrary  exaction.  A  State  has  the  right  to 
determine  according  to  its  own  considerations  of  public  policy 
what  subjects  shall  be  taxed  and  what  reasonable  classifica- 
tion shall  be  made  in  distributing  the  burdens  of  taxation, 
provided  that  the  classification  is  natural  and  reasonable 
and  not  arbitrary  and  oppressive.  What  is  natural  and  rea- 
sonable on  the  one  hand,  or  arbitrary  and  oppressive  on  the 
other,  must  be  determined  from  the  circumstances  of  each 
case,  as  from  the  nature  of  things  no  definite  rule  can  be 
formulated. 

It  will  be  seen  however  from  the  opinions  of  the  Supreme 
Court  and  the  several  State  courts  in  which  the  question  has 
been  discussed,  that  the  latter  tribunals  have  been  disposed 
to  give  a  stricter  construction  to  State  constitutional  provi- 
sions requiring  equality  and  uniformity  in  taxation  than  the 
Supreme  Court  has  given  to  this  clause  of  the  Fourteenth 
Amendment  as  a  restraint  upon  the  State  power  of  taxa- 
tion. Thus  in  the  matter  of  inheritance  taxation,  the 
Supreme  Court  held  valid  under  the  Fourteenth  Amend- 
ment a  progressive  tax  which  had  been  held  invalid  in  cer- 
tain State  courts  as  violative  of  equality  and  uniformity 
in  their  respective  constitutions.  '  This  disposition  of  the 
State  courts  to  enforce  strictly  their  own  constitutional  re- 


§  462  EQUAL  PROTECTION  OF  THE  LAWS.  607 

straints  may  in  part  at  least  account  for  the  fact  that  in  no 
case  has  the  Supreme  Court  held  a  State  tax  violative  of  the 
equal  protection  of  the  laws  guaranteed  by  the  Fourteenth 
Amendment.  The  very  existence  however  of  this  Federal 
guaranty,  conservative  as  the  Supreme  Court  has  been  in 
its  enforcement,  is  doubtless  a  protection  against  the  dis- 
criminating exercise  of  the  taxing  power. i 

1  The  subject  of  classification  was  thoroughly  considered  in  a  recent 
case  in  Indiana,  State  ex  rel.  v.  Smith,  63  N.  E.  Rep.  25  and  214,  decided 
February  27,  1902,  where  the  court,  two  judges  dissenting,  sustained,  as 
a  valid  classification  under  the  State  constitution  requiring  a  uniform 
rate  of  taxation,  and  also  under  the  Fourteenth  Amendment,  an  act 
aWowing  deduction  from  the  assessed  value  of  real  estate  of  mortgage 
indebtedness  to  the  amount  of  ^700,  no  deduction  being  allowed  greater 
than  one-half  of  the  assessed  value  of  the  real  estate. 


CHAPTER  Xyi. 

EQUAL  PROTECTION  OF  THE  LAWS  IN  THE  VALUATION  OF 

PROPERTY. 

§  463.  Inequality  in  taxation  through  inequality  of  valuation. 
464.  Inequality  of  valuation  from  error  of  judgment. 
.465.  Inequality  through  unequal  local  assessments. 

466.  Fraudulent  valuation  in  assessments. 

467.  Discrimination  by  undervaluation  of  other  property. 

468.  Dilemma  of  courts  in  remedying  unequal  valuations. 

469.  Habitual  and  intentional  violation  of  assessor's  duty    must  be 

proved. 

470.  Relief  against  discriminating  assessments  in  State  courts. 

471.  Equality  of  valuation  enforced  in  Federal  courts. 

472.  Judge  Taft  on  dilemma  of  courts. 

473.  Judge  Taft  on  distinction  between  sporadic  and  habitual  discrim- 

inations. 

474.  Collection  on  excessive  valuation  enjoined. 

475.  Formal  resolution  not  necessary  for  intentional  discrimination. 

476.  Chicago  franchise  tax  cases. 

477.  Valuation  by  capitalization  of  net  earnings. 

478.  Inequality  of  valuation  as  Federal  question. 

§  463.  Inequality  in  taxation  tliroiigh  inequality  of  val- 
uation. 

The  Federal  guaranty  of  equal  protection  of  the  laws  has 
been  invoked  to  remedy  another  form  of  discrimination, 
growing  out  of  habitual  and  intentional  inequality  in  the  valu- 
ation of  property  for  taxation.  It  is  obvious  that,  where 
taxation  is  upon  property  that  requires  valuation,  inequal- 
ity of  taxation  is  produced  as  surely  by  inequality  of  valua- 
tion as  by  inequality  of  the  rate  of  tax.  This  was  declared 
by  the  Supreme  Court  in  construing  the  Act  of  Congress, 
providing  that  State  taxation  upon  the  shares  of  the  national 
banks  should  not  be  at  a  greater  rate  than  is  assessed  on 
other  moneyed  capital. i     The  court  said  that  Congress  had 

1  Supra,  §  292. 
(608) 


§   463  EQUALITY  IN  VALUATION  FOR  TAXATION.  609 

iu  mind  an  assessment,  a  rate  of  assessment,  and  valuation, 
and  taking  all  these  together  the  taxation  on  these  shares 
was  not  to  be  greater  than  on  other  monej^ed  capital. 
Congress  therefore,  in  prohibiting  discrimination  in  taxa- 
tion against  national  banks,  prohibited  discriminations  in 
the  valuation  of  bank  shares.  The  principle  thus  apphed 
in  enforcing  equality  in  the  taxation  of  national  bank  shares 
has  been  applied  to  discriminations  in  the  taxation  of  other 
property,  effected  through  inequality  of  valuation  produc- 
ing inequality  in  taxation  under  the  same  rate  of  taxation. 
This  discriminating  inequality,  when  habitual  and  inten- 
tional, has  been  declared  violative  of  both  the  equahty  and 
uniformity  guaranteed  by  State  constitutions,  and  also  of 
the  equal  protection  of  the  laws  guaranteed  by  the  Federal 
Constitution. 

It  is  obviously  immaterial  what  the  basis  of  valuation  is, 
if  it  is  uniform  as  to  all  property  within  the  territory  or  as 
to  the  class  of  subjects  upon  which  the  tax  is  laid.  This 
is  recognized  in  the  requirement  of  State  constitutions,  that 
taxation  shall  be  uniform  upon  the  same  class  of  subjects 
within  the  territorial  limits  of  the  authority  imposing  it. 
Thus,  if  all  the  property  in  the  State  were  valued  on  the 
same  basis,  it  would  be  immaterial  to  the  individual  tax- 
payer whether  he  paid  one  per  cent  on  a  valuation  of  one 
hundred  cents,  or  two  per  cent  on  avaluationof  fifty  cents, 
or  four  per  cent  on  a  valuation  of  twenty -five  cents.  If 
there  were  no  general  property  tax  levied  by  the  State, 
based  upon  valuation,  it  would  make  no  difference  whether 
property  in  one  town  or  county  was  valued  on  a  higher 
basis  than  propert}^  in  another.  But  within  the  territory 
wherein  the  tax  is  levied,  as  iu  the  State  at  large  wherein 
the  State  tax  upon  property  is  levied  throughout  its  juris- 
diction, inequality  of  taxation  results  as  certainly  from  in- 
equality of  valuation  as  from  inequality  in  the  tax  rate. 
The  failure  to  recognize  this  fundamental  principle  in  tax- 


610  EQUALITY  IN  VALUATION  FOR  TAXATION.  §   464 

ation  oftentimes  makes  it  misleading  to  compare  for  illus- 
tration the  taxing  rates  of  different  States  or  communities, 
as  it  is  impossible  to  compare  the  burden  of  taxation  in 
different  communities,  unless  we  have  both  the  essential 
factors  of  the  problem,  the  rate  of  the  valuation  and  the 
rate  of  the  tax.^ 

§  464.  Inequality  of  valuation  from  error  of  judgment. 

This  inequality  of  valuation  may  exist  when  the  design 
on  the  part  of  the  assessors  is  honest,  and  there  is  no  inten- 
tional discrimination.  There  are  inevitable  inequalities  in 
valuation  growing  out  of  the  errors  and  infirmities  of 
human  judgment.  The  Supreme  Court  has  said  that 
"  perfect  uniformity  and  perfect  equality  of  taxation,  in  all 
the  aspects  in  which  the  human  mind  can  view  it,  is  a  base- 
less dream."  2 

The  influences  which  affect  the  salable  values  of  prop- 
erty are  variable  and  often  complicated.  Thus  it  has  been 
said  ^  that  the  differences  between  assessors  on  questions  of 
valuation  of  the  same  class  of  property  are  no  greater  than 
frequently  arise  between  witnesses  in  a  trial  on  questions  of 
value.  There  is  no  certain,  definite  standard  of  values,  ex- 
cepting of  money  and  standard  marketable  articles.  Many 
influences,  tangible  and  intangible,  affect  the  salable  value  of 
property,  real  and  personal,  both  in  city  and  country,  so  as 
to  make  its  real  valuation  a  work  of  great  difficulty  and  re- 
sulting in  inevitable  inequalities.  It  is  for  the  purpose 
therefore  of  remedying  as  far  as  practicable  these  inevita- 

1  Thus  in  Illinois  the  constitution  provides  for  a  tax  in  proportion  to 
value,  and  the  statute  directs  the  valuation  of  property  at  its  "  fair  cash 
value,"  one-fifth  or  twenty  per  cent  of  which  is  taken  as  the  assessed 
value  for  taxation.  R.  S.  1901,  §  312.  In  Iowa  the  statutory  basis  is 
twenty-five  per  cent  of  «'  actual  value,"  R.  S.  1897,  §  1305. 

2  Justice  Miller  in  the  Head  Money  Cases,  112  U.  S.  595. 

3  Sxipra,  §  295. 


§   465  EQUALITY  IN  VALUATION  FOR  TAXATION.  611 

ble  inequalities  growing  out  of  the  honest  but  mistaken 
judgment  of  assessors,  that  special  tribunals  are  provided 
for  the  equalization  of  values,  and  as  a  rule  inequalities  not 
involving  intentional  discrimination  can  only  be  remedied 
in  such  tribunals.^ 

§  465.  Inequality  throiigli  vmeqiial  local  assessments. 

These  inevitable  and,  as  a  rule,  irremediable  inequalities 
in  taxation  are  in  many  cases  grossly  aggravated  by  inten- 
tional lowering  or  raising  of  the  rate  of  valuation  by  local 
assessments  in  response  to  local  needs  or  local  public 
opinion.  In  many  States  the  maximum  tax  rate  of  mu- 
nicipalities or  counties  is  limited  by  the  constitution  or 
statutes,  so  that  a  higher  rate  of  valuation  is  enforced  in 
order  to  raise  the  revenues  for  municipal  or  local  expenses, 
while,  in  counties  where  there  is  no  such  need  for  revenue, 
valuations  are  made  at  a  lower  rate ;  so  that  the  State  tax 
is  lev  ied  upon  property  in  cities  at  a  higher  rate  of  valu- 
ation than  it  is  upon  other  property  in  the  State,  thus 
making  an  inequality  of  taxation  as  between  different  parts 
of  the  State. ^  Some  of  the  States  have  attempted  to 
remedy  these  admitted  inequalities,  growing  out  of  the 
action  of  local  assessors  influenced  by  local  considerations, 
through  a  State  Board  of  Equalization,  vested  with  power 
to  equalize  these  local  valuations  as  to  the  different  classes 
of  property.  This  method  of  redress  however  has  proven 
inadequate  to  remedy  the  evil,  and  it  is  believed  that  the 
only  effectual  cure  will  be  to  separate  the  sources  of  munici- 
pal and  State  revenue.  If  that  is  effected,  the  inequality 
in  valuation  between   the  local  subdivisions    of  the  State 

1  In  some  States,  as  in  New  York,  inequalities  in  values  may  be  re- 
viewed by  the  courts  on  writ  of  certiorari. 

2  In  some  States  county  assessors  are  reported  to  have  been  elected 
on  the  platform  of  lowering  the  county  assessments. 


612       EQUALITY  IN  VALUATION  FOR  TAXATION.      §  466 

would  be  immaterial,  as  no  common  tax  would  be  levied 
thereon.  1 

§  466.  Fraudulent  valuation  in  assessments. 

Assessors  act  in  a  semi-judicial  capacity,  and,  as  a  rule, 
their  judgments  are  only  reviewable  in  special  tribunals  es- 
tablished b}^  the  State  for  that  purpose,  so  far  as  errors  of 
judgment  in  valuation  are  concerned.  These,  like  all  judg- 
ments, may  be  vacated  for  fraud  in  direct  proceedings, 
but  the  fraud  must  be  clearly  established.^  Accord- 
ingly an  invidious  assessment,  made  unequal  and  oppres- 
sive through  intentional  unfairness  of  valuation,  will 
be  set  aside.  Thus  the  Supreme  Court  of  Michigan,  in  an 
opinion  by  Judge  Cooley,  held  that  a  bill  was  not  demur- 
rable, which  alleged  that  an  assessment  was  fraudulently 
made  above  the  real  value  of  the  property  and  relatively 
much  above  other  property.  Later ,^  the  same  court  ap- 
plied this  principle  to  a  case  where  a  fraudulent  underval- 
uation of  certain  jDroperty  was  .alleged  which  resulted  in  the 
increase  of  plaintiff's  assessment,  and  the  court  held  that 
the  plaintiff  was  entitled  to  a  reduction  to  the  extent  that 
his  assessment  was   increased  by  reason  of  such  fraudulent 

1  Tiie  experience  of  Missouri  in  this  regard  is  interesting,  as  it  is 
fairly  typical  of  other  States  in  this  matter.  From  a  careful  investiga- 
tion made  a  few  years  since,  it  was  found  that  the  rate  of  assessments 
varied  in  the  State  from  20%  to  80%  of  the  full  value,  the  average  assess- 
ment of  farm  lands  being  about  35%.  In  St.  Louis,  real  estate  was 
assessed  at  70%,  while  money  and  securities,  when  discovered  by  the 
assessor  (mainly  in  the  Probate  Court;,  were  assessed  at  100%.  The 
only  effectual  equalizing  by  the  State  Board  of  Equalization  was  in  the 
case  of  banks  and  trust  companies,  which  had  been  locally  assessed  in 
the  different  cities  and  counties  all  the  way  from  38%  to  100%,  and  the 
State  Board  fixed  an  equalized  value  at  63%.  The  equalizing  of  general 
property  valuations  was  found  impossible.  See  writer's  "  Taxation  in 
Missouri,"  Chapter  XVI. 

2  Merrill  v.  Humphrey,  24  Mich.  170. 

3  Walsh  V.  King,  74  Mich.  350. 


§   467  EQUALITY  IN  VALUATION  FOR  TAXATION.  613 

valuation.  It  said:  "  We  cannot  agree  with  the  authorities 
cited  by  defendant  to  sustain  the  position  that  a  willful  or 
intentionalviolationof  the  law,  by  the  omission  of  property 
from  assessment  or  its  deliberate  undervaluation,  must  be 
treated  the  same  in  equity,  as  regards  the  assessment  and 
valuation  of  property  for  taxation,  as  an  accidental  omission 
or  an  honest  mistake  in  judgment  because  the  result  is  the 
same  in  both  cases.  Fraud  is  ever  open  to  remedy  in  a 
court  of  equity,  and  there  can  exist  no  good  reason  why 
relie:^,  against  fraud  in  taxation,  which  in  the  end  depriA'es 
a  man  of  his  property  without  due  process  of  law,  cannot 
be  granted  as  well  as  against  any  other  fraud."  i 

§  467.  Discrimination   by   undervaluation  of  other  prop- 
erty. 

The  proof  of  such  fraudulent  undervaluation,  which 
would  warrant  a  court  in  setting  aside  an  assessment,  is 
rarely  obtainable.  The  real  difficulty,  which  is  widely  prev- 
alent, arises  not  from  discrimination  by  intentional 
overvaluation,  that  is,  by  valuing  property  at  more  than 
the  true  value,  but  by  the  undervaluation  of  other  property. 
This  may  not  be  fraudulent  in  the  sense  that  it  proceeds 
from  a  corrupt  motive  on  the  part  of  the  assessor,  but  it 
is  intentional,  and,  when  it  is  habitual,  as  it  often  is,  it 
operates  as  an  effective  discrimination.  This  discrimina- 
tion may  be  effected,  although  the  property  of  the  party 
discriminated  against  may  also  be  valued  at  less  than  its 
true  value,  through   the  greater   undervaluation    of   other 

1  See  also  Pacific  Postal  Telegraph  Cable  Co.  v.  Dalton,  119  Cal.  604, 
holding  that  a  taxpayer  may  eujoin  the  collection  of  a  tax  founded  upon 
assessments  fraudulently  and  corruptly  made  with  intention  of  discrim- 
inating against  him,  and  for  the  purpose  of  causing  him  to  pay  more 
than  his  just  share  of  taxes,  but  not  foe  mere  error  in  judgment.  See 
also  Hersey  u.  Supervisors,  16  Wis.,  185,  where  an  intentional  omission 
was  held  to'  avoid  an  assessment. 


614  EQUALITY  IN  VALUATION  FOR  TAXATION.  §   468 

property.  It  is  the  relative  valuation  of  property  which 
constitutes  discrimination.  Thus,  if  the  property  of  one 
taxpayer  or  class  of  taxpayers  is  valued  at  eighty  per  cent 
of  the  full  value,  while  all  other  property  subject  to  the 
same  tax  is  valued  at  forty  per  cent,  there  is  as  clear  and 
effective  a  discrimination,  as  if  the  assessment  of  the  former 
had  been  above  the  true  value  and  all  other  assessments  at 
the  true  A'alue. 

§  468.  Dilemma   of  courts  in  i-emedying   unequal  valua- 
tions. 

The  courts  of  some  of  the  States  have  found  a  difficulty 
in  remedying  this  form  of  discrimination  in  taxation,  as 
such  remedy  would  involve  the  judicial  recognition  of  the 
practice  of  undervaluing  property  in  violation  of  the  constitu- 
tional or  statutoiy  requirement,  that  all  property  should  be 
assessed  at  its  full  or  cash  value.  This  requirement  is 
differentl}^  phrased  in  the  constitutions  or  statutes  as  "  full 
value,"  "cash  value,"  or  "  fair  cash  value."  Not  only 
is  it  presumed  that  assessors  perform  their  official  duty  and 
do  not  violate  their  official  oaths,  but  these  courts  have 
found  it  difficult  to  relieve  disproportionate  taxation  by 
directing  a  reassessment  or  a  reduction  of  an  assessment 
below  the  "  full  value "  directed  by  the  constitution  or 
statute  CFfthe  State. 

Thus  it  was  said  by  the  Supreme  Court  of  Massachu- 
setts:'^ "Whatever  may  be  the  remedy,  if  there  be  any, 
when  it  is  shown  that  the  assessors  have  intentionally 
assessed  the  property  of  a  part  or  all  of  the  inhabitants  at 
less  than  its  fair  cash  value,  we  are  of  opinion  that,  in  a 
petition  for  the  abatement  of  taxes  on  the  ground  of 
the  overvaluation  of  the  property  of  the  petitioner,  and 
the  disproportionate  taxation  arising  from  such  overvalua- 

1  Lowell  V.  Co.  Commissioners,  152  Mass.  375. 


§   4(39  EQUALITY  IN  VALUATION  FOR  TAXATIOX.  615 

tion,  the  question  is,  whether  the  property  has  been  valued 
at  more  than  its  fair  cash  vahie,  and  not  whether  it  has 
been  vahied  relatively  more  or  less  than  similar  property  of 
other  persons."  ^ 

Also  in  New  Jersey,"^  where  it  was  claimed  that  the 
State  Board  had  assessed  corporate  property  at  its  "  true 
value"  and  local  assessors  had  assessed  other  property 
"at  much  below  its  true  value,"  the  court  said  that  the 
argument  that  the  State  Board  should  be  compelled  to 
pursue  the  same  forbidden  course  had  no  force  whatever. 

Jn  an  Ohio  case,^  the  court  said  that  a  gross,  if  not  scan- 
dalous, inequality  existed  between  the  burdens  of  taxation 
cast  upon  bank  shares  and  those  imposed  upon  other  prop- 
erty in  the  county.  But  it  said  that  the  blame  attached  to 
the  officers  of  the  law  and  not  to  the  law  itself,  and  that, 
to  reduce  plaintiff's  assessment  from  eighty  per  cent,  its 
value  fixed  by  the  assessor,  to  the  forty  per  cent  at  which 
other  property  was  valued,  would  put  an  additional  wrong 
upon  the  other  counties  of  the  State  where  property  was 
presumably  valued  for  State  purposes  at  the  full  value 
prescribed  by  the  statute.* 

§  469.  Habitual   and   intentional  violation  of  assessor's 
duty  must  be  proved. 

The  presumption,  on  which  these  decisions  of  the  State 

1  This  was  the  case  of  a  manufacturing  company,  and  it  was  held  that 
the  evidence  of  what  other  manufacturing  property  was  valued  at  was 
admissible  only  as  a  possible  assistance  in  determining  the  cash  value  of 
the  property  in  question,  as  that  and  not  the  proportionate  value  was 

in  issue. 

2  Central  Railroad  Company  v.  Assessors,  48  N.  J.  L.  1,  decided  in 

1886. 

3  Wagoner  u.  Loorais,  37  Ohio  St.  571. 

4  This  case  is  an  interesting  illustration  of  the  injustice  and  effectual 
inequality  enforced  through  the  presumption  that  officers  of  the  law  do 
their  duty,  when  it  is  notorious  that  they  do  not. 


616       EQUALITY  IN  VALUATION  FOR  TAXATION.      §  469 

courts  are  based,  that  assessors  sworn  to  assess  property  at 
its  true  value  or  true  cash  vahie  perform  their  official  dut}^ 
has  been  recognized  and  applied  b}^  the  Supreme  Court, 
where  discriminations  through  undervaluations  of  other 
property  were  claimed  as  a  denial  of  the  equal  protection 
of  the  laws  under  the  Fourteenth  Amendment.  That  court 
has  therefore  held  that  such  undervaluation  cannot  be 
presumed,  but  must  be  distinctly  alleged  and  proved.  In 
this  case  the  New  York  Court  of  Appeals  said  ^  that,  while  it 
was  generally  understood  that  in  many  localities  throughout 
the  States  assessors,  in  violation  of  their  duties,  valued 
real  estate  at  less  than  its  actual  value,  the  court  could  not 
assume  without  proof  that  there  had  been  such  undervaluation 
in  the  city  of  New  York,  which  was  the  place  where  the 
assessment  was  complained  of.  In  the  Supreme  Court ,2 
reliance  was  placed  upon  the  expressions  in  the  opinion  in 
Cummings  v.  National  Bank  ^  as  to  the  notoriety  of  the 
practice  of  undervaluation  by  assessors.  But  the  court 
said  that  in  that  case  the  bill  alleged  the  fact  of  under- 
valuation and  the  testimony  supported  the  allegation,  and 
added : — 

"  Although  the  justice  who  wrote  the  opinion  did  speak 
of  the  fact  as  matter  of  common  observation,  neither  he 
nor  the  court  took  judicial  notice  thereof,  but  only  those 
facts  which  had  been  pleaded  and  testimony  to  sustain 
which  had  been  duly  given  formed  the  basis  of  judicial 
action.  We  will  not  and  ought  not  to  presume  a  violation 
in  the  absence  of  allegations  and  proofs  to  that  effect." 

The  court  said  that  there  was  no  allegation  in  the  petition 
for  cerfioi^ari  that  the  laws  of  the  State  provided  for  an 
undervaluation  of  property,  either  with  regard  to  individ- 
uals   or  corporations,  but  on  the  contrary  it  was  therein 

1  People  ex  reL  v.  Barker,  146  N.  Y.  304. 

2  New  York  State  ■«.  Barker,  179U.  S.  279. 

3  101  U.  S.  153. 


§   469  EQUALITY  IN  VALUATION  FOR  TAXATION. 

asserted  that  the  assessed  valuation  of  the- real  estate  aV 
its  actual  value,  and  the  whole  force  of  the  plaintiff's  coi 
tention  was  based  upon  the  fact  of  undervaluation,  although^ 
it  was  in  the  teeth  of  the  statute  and  in  phiin  violation  of 
its  provisions.  In  order  to  raise  the  question  of  the  denial 
of  equal  protection  of  the  laws,  it  was  obviously  necessary, 
the  court  said,  to  allege  and  prove  that  there  was  habitual 
violation  of  the  law  by  undervaluation ;  that  the  assessors 
habitually  and  intentionally,  or  by  some  rule  prescribed  by 
themselves  or  by  some  one  whom  they  were  b@und  to  obey, 
undervalued  real  estate  b}^  assessment  in  New  York  City, 
and  that  such  rule  had  been  applied,  not  solely  to  one  in- 
dividual, but  to  a  large  class  of  individuals  or  corporations. 
The  court  said,  further,  that  this  was  the  effect  of  the  rul- 
ing in  the  National  Bank  Cases,  where  the  court  had  en- 
forced the  Act  of  Congress  prohibiting  discrimination 
ao-ainst  national  bank  shares.  Whether  the  facts  assumed 
by  counsel,  as  to  the  undervaluation  of  real  estate  held  by 
individuals  as  compared  with  corporate  property,  would 
amount  to  such  a  discrimination  against  corporations  as  to 
work  a  denial  of  the  equal  protection  of  the  laws,  was  a 
question  not  raised  by  the  record  and  not  necessary  to  be 
decided.^ 

The  rule  established  in  the  National  Bank  Cases  against 
discriminating  taxation  in  violation  of  the  National  Bank- 
ing Act  has  not  as  yet  been  applied  by  the  Supreme  Court 
to  a  similar  discrimination  in  the  taxation    of  other  prop- 


1  This  presumption  ttiat  assessors  perform  tlieir  duty  was  recently 
applied  in  Missouri,  where  it  was  held,  State  ex  rel.  v.  Western  Union 
Tel.  Co.,  165  Mo.  502,  that  the  testimonyof  one  member  of  the  State 
Board  of  Equalization,  that,  in  his  judgment,  the  valuation  put  upon 
property  generally  was  only  35  to  40  per  cent  of  its  true  value,  was  in- 
sufBcient  to  overcome  the  presumption  that  the  officers  did  their  duty  in 
assessing  property  at  its  true  value  in  money  as  required  by  the  statute. 
This  testimony  was  held  insufficient  to  convict  the  local  assessors  of  sys- 
tematic and  intentional  violation  of  duty. 


618  EQUALITY  IN  VALUATION  FOR  TAXATION.  §   470 

erty,  as  being  a  denial  of  the  equal  protection  of  the  laws 
under  the  Fourteenth  Amendment ;  ^  that  is,  a  case  has  not 
yet  been  presented  where  the  facts  sustain  the  allegation 
that  there  was  an  intentional  and  habitual  discrimination  in 
valuations,  under  the  rule  declared  in  the  National  Bank 
Cases  and  in  the  case  above  cited. 

§  470.  Relief  against  discriminating  assessments  in  State 
courts. 

Equality  in  taxation,  that  is,  equality  as  to  the  same  class 
of  subjects  upon  which  the  tax  is  levied,  both  in  the  tax 
rate  and  in  the  valuation  of  property,  is  not  only  guaranteed 
by  the  provisions  of  many  State  constitutions,  but  is  in- 
herent in  taxation  as  distinguished  from  arbitrary  exaction. 
Equality  in  this  sense  therefore,  as  already  shown,  is  equiv- 
alent to  the  equal  protection  of  the  laws  under  the  Four- 
teenth Amendment.  When  cases  of  discrimination  in  assess- 
ments through  undervaluations  are  presented  to  the  State 
courts,  they  are  confronted  with  the  dilemma  whether  they 
should  give  effect  to  the  paramount  intent  inherent  in  tax- 
ation, whether  specifically  declared  in  the  State  constitution 
or  not,  that  taxes  shall  be  equally  levied,  or  whether  they 
should  disregard  that  intent  and  deny  relief,  because  of  the 
statutory  requirement  that  all  property  shall  be  assessed  at 
its  cash  value. 

Several  State  courts  have  taken  the  former  course  and 
granted  relief  where  the  complainant's  property  was  assessed 
at  less  than  the  true  value,  but  at  a  higher  rate  than  other 
property  in  the  same  jurisdiction.     Thus  in  Connecticut, ^ 


1  It  was  held  in  Alburquerque  Bank  v.  Perea,  147  U.  S.  87,  that  a  plain- 
tiff could  not  complain  of  the  underassessment  of  other  property, 
when  his  own  property  was  also  assessed  below  the  required  "cash 
value,"  without  proof  of  design  on  the  part  of  officials. 

2  Randell  v.  City  of  Bridgeport,  63  Conn.  321. 


§   470  EQUiCLITY  IN  VALUATION  FOR  TAXATION.  619 

where  there  was  no  direct  constitutioual  requirement  of  equal 
taxation,  the  statute  required  that  property  should  be  as- 
sessed at  its  full  market  value.  Plaintiff's  property  was  so 
assessed,  contrary  however,  as  was  shown,  to  the  practice 
of  the  assessing  board,  which  regularly  assessed  property 
at  one-half  of  its  market  value.  The  complainant  was  de- 
clared entitled  to  an  assessment  according  to  the  uniform 
rule,  in  the  face  of  the  mandatory  provision  of  the  statute 
that  all  property  should  be  assessed  at  its  true  market  value, 
the  court  saying:  — 

' '  There  are  two  ways  in  which  a  taxpayer  may  be 
wronged  in  levying  taxes :  An  assesment  may  conform  to 
the  statute  generally,  and  the  individual  may  be  assessed 
in  excess  of  the  statutory  requirement.  A  wrong  of  that 
description  is  easily  redressed.  But  when  the  town  disre- 
gards the  statute,  and  establishes  a  rule  of  its  own, 
assessing  the  property  at  one-half  of  its  actual  value,  and 
then  assesses  an  individual  at  the  full  value  of  the  property, 
while  the  injury  is  the  same,  the  application  of  the  remedy 
becomes  more  complicated.  Practically,  the  only  way  to 
redress  the  wrong  is  to  reduce  the  assessment,  and  that 
makes  the  court  seem  to  disregard  the  statute,  while,  if  the 
Avrong  is  not  redressed,  there  is  a  denial  of  justice,  and  the 
court  practically  ignores  the  statute  giving  an  aggrieved 
party  an  appeal,  and  practically  ignores  the  statute  which 
provides  that  '  said  court  shall  have  power  to  grant  such 
relief  as  shall  to  justice  and  equity  appertain,'  Thus  we 
are  in  a  dilemma.  If  we  choose  one  horn  of  it,  a  public 
statute  is  violated,  not  so  much  by  the  court  as  by  the 
tow^n,  but  by  an  apparent  approval  of  the  court  as  to  one 
individual,  and  that  by  an  express  command  of  another 
statute,  and  by  the  dictates  of  justice.  If  we  take  the 
other  horn,  the  court  itself  violates  a  remedial  statute,  and 
becomes  in  a  measure  a  party  to  the  wrong-doing.     Under 


620  EQUALITY  IN  VALUATION  FOR  TAXATION.  §   470 

the  circumstances,  we  do  not  hesitate  to  choose  the  former, 
and  to  redress  the  wrong."  ^ 

In  Arkansas,'^  the  assessment  of  a  bridge  was  reduced  to 
fifty  per  cent  of  its  actual  value  because  this  appeared  to 
be  the  regular  rate  of  valuation  assessed  upon  all  realty  in 
the  county,  although  the  statute  on  the  subject  provided 
that  property  should  be  assessed  at  its  "true  market  value 
in  money."     The  court  said:  — 

"  It  may  be  said  that,  inasmuch  as  its  property  was  not 
assessed  above  its  true  value,  it  had  no  right  to  complain. 
But  this  is  not  true.  It  had  the  right  to  demand  that  no 
unequal  burden  be  imposed  upon  it  by  taxation.  The  duty 
to  contribute  to  the  support  of  the  State  government  by 
the  payment  of  taxes  is  imposed  upon  all  persons  owning 
property  subject  to  taxation.  The  Constitution  provides 
that  this  burden  shall  be  apportioned  among  them  accord- 
ing to  the  value  of  their  property,  to  be  ascertained  as  di- 
rected by  law.  When,  therefore,  the  property  of  a  few  is 
taxed  according  to  its  value,  and  of  all  others  at  one-half 
its  value,  then  the  few  are  required  to  contribute  double 
their  portion  of  the  burden.  This  is  manifestly  a  wrong 
and  justice  demands  that  it  be  redressed  whenever  it  can 
be  done  conformably  to  the  laws." 

In  Illinois  the  statute  directed  that  each  parcel  of  prop- 
erty should  be  valued  at  its  true  value  in  money.  In  a  case 
where  it  appeared  ^  that  the  valuation  of  the  property  of 
individuals  ranged  from  one-fifth  to  one-third,  while  that 
of  the  railroad  companies  ranged  from  one-third  to  one- 
half,  the  court  held  that  the  assessment  of  the  railroad 
property  must  be  at  the  same  percentage  of  the  real  value 
as  that  of  individuals,  and  said:  — 

"The  rule  adopted  by  the    assessors  in  this  State  has 

1  See  also  to  the  same  effect  Cocheco  Co.  v.  Stratfordj  51  N.  H.  455, 

2  Ex  parte  Bridge  Co.,  62  Ark.  461. 

3  Board  of  Supervisors  v.  Railroad  Co.,  44  III.  229. 


§  471     EQUALITY  IN   VAEUATION  FOR  TAXATION.       63 

grown  into  a  custom,  and  has  been  tacitly  sanctioned  by 
every  department  of  the  government  for  a  long  course  of 
3"ears,  and  it  is  now  too  late  to  challenge  it.  *  *  * 
Would  not  the  sense  of  justice  of  every  man  in  this  com- 
munity be  outraged  by  allowing  this  or  any  other  deprecia- 
tion to  one  class  of  people,  and  demanding  of  another  a 
higher  tax  on  a  similar  article  of  the  same  actual  value? 
The  proposition  cannot  commend  itself  to  the  favor  of  any 
just  man,  and  can  receive  no  countenance  in  a  court  of 
justice." 

In  Kansas  the  constitution  of  the  State  required  that  the 
legislature  should  provide  for  a  uniform  and  equal  rate  of 
assessment  for  taxation,  while  by  the  terms  of  the  statute 
all  property  must  be  assessed  at  its  true  value.  The  court 
heldi  that  the  assessment  of  railroad  property  at  its  true 
value,  while  the  property  of  individuals  and  other  corpora- 
tions was  assessed  at  twenty-five  per  cent  of  its  true  value, 
was  not  uniform  and  equal  taxation,  and  that  plaintiff ,  hav- 
ing tendered  its  just  share  of  taxes,  was  entitled  to  enjoin 
the  collection  of  the  illegal  excess. 

§  471.  Equality  of  valuation  enforcetl  in  Federal  courts. 

These  rulings  of  the  State  courts  last  cited,  that  effect 
must  be  given  to  the  paramount  purpose  of  equality  in 
taxation,  in  disregard  of  the  statutory  directions  that 
property  must  be  assessed  at  its  full  value,  have  been  fol- 
lowed in  several  notable  cases  in  the  Federal  courts. 

The  United  States  Circuit  Court  of  Appeals  for  the 
Eigiith  Circuit  followed  the  decision  of  the  Supreme  Court 
of  Kansas,  and,  reversing  the  United  States  Circuit  Court, 
directed  a  decree  of  injunction  against  the  enforcement  of 
a  tax  on  the  full  value  of  the  plaintiff's  property,  assessed 

1  C.  B.  &  Q.  R.  R.  Co.  V,  Board  of  Commissioners,  Si  Kansas  781. 


622  EQUALITY  IX  VALUATION  FOR  TAXATION.  §471 

by  the  State  Board  of  Assessors  of  a  county,  pursuant  to 
agreement  among  themselves,  while  other  property  in  the 
county  was  assessed  at  only  one-third  of  its  value. i 

Reference  has  already  been  made  to  the  opinion  of  Mr. 
Justice  Field  in  the  California  Railroad  Case,^  wherein 
was  first  announced  the  application  of  the  Fourteenth 
Amendment  to  discriminating  taxation.  In  holdinof  that 
the  deduction  of  a  mortgage  from  the  valuation  of  real 
estate  in  other  cases  and  denying  such  deduction  in  the 
case  of  a  railroad  was  necessarily  a  discrimination,  the 
court  said  at  page  394:  "  The  basis  of  all  ad  valorem 
taxation  is  necessarily  the  assessment  of  the  propertj^; 
that  is,  the  estimate  of  its  value.  Whatever  affects  the 
value  necessarily  increases  or  diminishes  the  tax  propor- 
tionately. If,  therefore,  any  element  which  is  taken  into 
consideration  in  the  valuation  of  the  property  of  one  party 
be  omitted  in  the  valuation  of  the  property  of  another, 
a  discrimination  is  made  against  the  one  and  in  favor  of 
the  other,  which  destroys  the  uniformity  so  essential  to  all 
just  and  equal  taxation."  ^ 

An  opinion  by  Judge  Taft  in  the  United  States  Circuit 
Court  of  Appeals  for  the  Seventh  Circuit,*  contains  a 
thorough  review  of  the  authorities  and  is  a  valuable  con- 
tribution on  this  question  to  our  jurisprudence.  It  was 
established  by  the  evidence  that  other  property  in  the 
State  of  Tennessee  than  that  of  railroad  companies  was 
habitually  and  intentionally  assessed  at  not  exceeding 
seventy-five  per  cent  of  its  real  value.  The  actual  value 
of   the   railroad  and  telegraph  lines  as  compared  with  that 

1  C.  B.  &  Q.  R.  E.  Co.  V.  Commissioners  of  Republic  County,  67  Fed. 
Rep.  411, .14  C.  C.  A.  456,  and  32  U.  S.  App.  224. 

2  Supra,  §311. 

3  18  Fed.  Rep.  385. 

*  Taylor  v.  L.  &  N.  R.  R.  Co.,  31  C.  C.  A.  537,  and  86  Fed.  Rep.  350, 
affirming  85  Fed.  Rep.  302,  and  86  Fed.  Rep.  168. 


§    472  EQUALITY  IN  VALUATION   FOR  TAXATION.  623 

of  other  property  would  make  the  share  of  the  former  in 
the  payment  of  taxes  a  little  less  than  one-eighth  of  the 
whole.  The  actual  assessment  of  railroad  and  telegraph 
property  placed  upon  them  an  additional  burden,  so  as  to 
make  their  share  of  the  total  taxation  one-sixth  instead  of 
one-eio-hth.  The  constitution  of  the  State  not  only  di- 
rected  that  taxes  should  be"  equal  and  uniform  "  through- 
out its  jurisdiction,  but  specifically  required  that  "  no  one 
species  of  property  from  which  a  tax  might  be  collected 
should  be  taxed  higher  than  any  other  of  the  same  value  ;  " 
and  the  statute  of  the  State  required  that  all  property 
should  be  assessed  at  its  full  value. i 

§  472.  Judge  Taft  on  dilemma  of  courts. 

Upon  the  question  presented  whether  the  court  should 
enforce  equality  in  disregard  of  the  statute  or  refuse  to 
remedy  inequality  by  following  the  statute,  the  court  said 
that  the  intentional  and  systematic  disregard  of  the  law  by 
those  charged  with  the  duty  of  assessing  all  other  species 
of  property  than  that  owned  by  complainant  and  its  fellows 
in  the  same  class  was  a  flagrant  violation  of  the  constitu- 
tion of  the  State  forbidding  discrimination  in  taxation  be- 
tween different  species  of  property.  In  answer  to  the 
suo'o'estion  that  the  only  remedy  consistent  with  the  constitu- 
tion was  by  raising  the  assessments  of  other  property,  the 
court  said  that  this  was  no  remedy  at  all,  as  it  would  involve 
raisino-  the  total  tax  assessment  of  the  State  in  each  of  the 
counties,  and  the  absolute  futility  of  such  a  course  and  the 

1  Judge  Taft  said  in  his  opinion  that  Judge  Lurton  and  he  were  in- 
clined to  think  that  any  legislative  system  of  tax  assessment  of  property 
based  on  a  uniform  percentage  of  its  value  would  be  "  according  to  its 
value"  and  would  be  a  compliance  with  the  constitutional  mandate. 
The  third  judge,  Severance,  doubted  on  this  subject,  but  it  was  said  the 
difference  was  not  material  for  they  were  of  the  unanimous  opinion  that 
the  question  was  not  controlling. 


624  EQUALITY  IX  VALUATION  FOR  TA^XATIOX.  §   472 

enormous  expense  and  length  of  time  necessary  needed  no 
comment.  The  court  added,  at  page  552  :  "  The  question 
presented  is,  then,  whether,  when  the  sole  object  of  an 
article  of  the  constitution  is  being  flagrantly  defeated,  to 
the  gross  pecuniary  injury  of  a  class  of  litigants,  and  one 
of  them  appeals  to  a  court  of  equity  for  relief,  it  must  be 
withheld  because  the  only  mode  of  granting  it  will  involve 
an  apparent  departure  from  the  method  nuirked  out  by  the 
constitution  and  the  law  for  attaining  its  sole  object.  We 
say  '  apparent '  dej3arture  from  the  constitutional  method 
because  that  instrument  contemplated  a  system  in  which  all 
property  should  be  assessed  at  its  real  value.  It  did  not 
intend  that  a  large  part  should  be  assessed  at  75  per  cent, 
and  a  smaller  part  at  100  per  cent.  The  method  of  assess- 
ing one  species  of  property  cannot  be  truly  said  to  be  consti- 
tutional, without  having  regard  to  that  pursued  with  other 
species  ;  for  the  essence  of  the  constitutional  requirement  is 
uniformity,  and  uniformity  cannot  be  affirmed  to  exist 
without  a  due  regard  to  the  methods  of  assessing  all  spe- 
cies. Therefore,  to  enjoin  the  enforcement  of  the  pre- 
scribed method  of  assessment  as  to  one  species  of  propertj^ 
when  there  is  a  departure  from  it  as  to  all  others,  if  the 
injunction  secures  uniformity  as  to  all,  is  not  so  great  a 
violation  of  the  method  really  prescribed  as  that  involved 
in  a  continuance  of  the  existing  conditions,  and  the  denial 
of  relief  to  the  injured  taxpayer.  The  court  is  placed  in 
a  dilemma,  from  which  it  can  only  escape  b}^  taking  that 
path  which,  while  it  involves  a  nominal  departure  from  the 
letter  of  the  law,  does  injuiy  to  no  one,  and  secures  that 
uniformity  of  tax  burden  which  was  the  sole  end  of  the 
constitution.  To  hold  otherwise  is  to  make  the  restric- 
tions of  the  constitution  instruments  for  defeating  the 
very  purpose  they  were  intended  to  subserve.  It  is  to 
stick  in  the  bark,  and  to  be  blind  to  the  substance  of 
things.     It  is  to  sacrifice  justice    to    its  •  incident.     The 


§  473     EQUALITY  IN  VALUATION  FOR  TAXATION,       625 

same  dilemma  has  been  presented  to  other  courts.     They 
have  not  always  taken  the  same  horn." 

§  473.  Judge  Taft  ou  distinction  between  sporadic  and 
habitual  discriminations. 

Judge  Taft  commented  on  the  decision  of  the  Supreme 
Court  in  the  Cummings  case  i  and  held  that  the  principle 
there  laid  down  in  regard  to  discrimination  in  the  valua- 
tion of  national  bank  shares  applies  as  well  in  the  assess- 
ment of  other  classes  of  property.  He  said  that  there 
was  nothing  in  the  subsequent  decisions  of  the  Supreme 
Court, 2  distinguishing  between  habitual  and  sporadic  dis- 
criminations, that  changed  the  effect  of  the  Cummings 
case,  adding,  page  560 :  — 

"  They  merely  emphasize  the  point  that  equity  will  not 
relieve  against  an  assessment  merely  because  it  happens  to 
be  at  a  higher  rate  than  that  of  other  property ;  that  such 
inequalities,  due  to  mistake,  to  the  fallibility  of  human 
judgment,  or  to  other  accidental  causes,  must  be  borne,  for 
the  reason  that  absolute  uniformity  cannot  be  obtained; 
that,  in  other  words,  what  may  be  called  '  sporadic  cases 
of  discrimination  '  cannot  be  remedied  by  the  chancellor. 
He  can  only  interfere  when  it  is  made  clear  that  there  is, 
with  respect  to  certain  species  of  property,  systematic,  in- 
tentional, and  unlawful  undervaluations  for  taxation  by  the 
taxing  officers,  Avhich  necessarily  effect  an  unjust  discrimi- 
nation against  the  species  of  property  of  which  the  com- 
plainant is  an  owner.  The  reason  for  the  distinction  is 
obvious.  The  occasional  and  accidental  discriminations  are 
inevitable  in  every  assessment,  and  are  not  likely  to  con- 
tinue, because  not  the  result  of  an  illegal  purpose  on  the 
part  of  any  one.     If  equitable  interference  in  such  cases 

1  Supra,  §  293. 

2  Bank  v.  Kimball,  supra,  §  294;  Stanley  v.  Supervisors,  supra,  §  294; 
Albuquerque  Bank  v.  Ferea,  supra,  §  469,  note. 

40 


626       EQUALITY  IX  VALUATION  FOR  TAXATION.      §  474 

could  be  invoked,  the  obstruction  to  the  collection  of  taxes 
would  be  so  frequent  as  to  be  intolerable.  More  than  this, 
an  action  to  enjoin  a  tax,  is  a  collateral  attack  upon  the 
judgment  of  a  quasi  judicial  tribunal;  and  it  cannot  be 
justified  except  on  the  ground  of  an  obvious  violation  of  law, 
or  something  equivalent  to  fraud.  It  does  not  lie  where 
the  injury  complained  of  arises  only  from  the  erroneous, 
but  honest,  judgment  of  the  lawfully  constituted  tax 
tribunal.  The  interference  by  the  chancellor  in  the  case  at 
bar  and  in  the  Cummings  case  rests  on  something  equivalent 
to  fraud  in  the  tribunal  imposing  the  tax." 

§  474.  CoUectioii  on  excessive  valuation  enjoined. 

The  court  further  said  in  this  case,  as  to  the  remedy  to 
be  applied,  that  the  entire  assessment  on  all  classes  of  prop- 
erty was  to  be  regarded  as  one  judgment.  The  effect  of 
an  intentional  and  therefore  fraudulent  violation  of  the  law 
by  uniformly  undervaluing  certain  classes  of  property,  while 
assessing  other  classes  at  the  full  value,  though  a  literal 
compliance  with  the  law,  made  the  whole  assessment,  con- 
sidered as  one  judgment,  a  fraud  upon  the  fully  assessed 
propert3^  This  was  true,  although  the  particular  board 
which  assessed  complainant's  property  might  have  been 
free  from  fraud  or  intentional  discrimination.  The  court 
said  therefore  that  an  injunction  could  properly  issue  against 
the  assessment  upon  the  fully  assessed  property  as  void 
altogether,  until  a  new  and  uniform  assessment  upon  all 
property  according  to  law  could  be  made.  In  view  how- 
ever of  the  inconvenience  to  the  public  of  the  delay  in- 
cident to  a  new  assessment,  the  injunction  would  extend 
only  to  so  much  of  the  tax,  as  was  based  upon  the  excessive 
assessment,  and  the  injunction  therefore  required  that  the 
complainant  as  a  condition  to  the  issue  should  pay  to  the 
proper  officers  a  tax  of  seventy-five  per  cent  of  the  assess- 
ment made  by  the  defendants. 


§  475     EQUALITY  IN  VALUATION  FOR  TAXATION.       627 

The  opinion,  in  this  case,  while  masterly  in  its  reasoning 
and  analysis  of  the  law,  does  not  discuss  or  invoke  the 
guaranty  of  the  equal  protection  of  the  laws  under  the 
Fourteenth  Amendment,  but  is  based  upon  general  consti- 
tutional principles  of  taxation  expounded  by  the  State  courts 
in  the  cases  cited.  Jurisdiction  in  the  case  was  based  upon 
adverse  citizen  ship,  i 

§  475.   Formal  resolution   not   necessary  for  intentional 
discrimination. 

While  the  courts  presume  that  assessors  perform  their 
duty,  and  habitual  and  intentional  discrimination  must  not 
only  be  alleged  but  proved,  it  does  not  follow  that  this  in- 
tention of  assessors  to  discriminate  should  be  proved  by 
formal  resolution  to  that  effect.  This  was  ruled  in  the 
case  of  discrimination  against  the  shareholders  in  national 
banks. 2  Thus,  in  the  United  States  Circuit  Court  of 
Oregon,  where  it  was  claimed  that  the  lands  in  certain 
counties  were  assessed  at  one-third  of  their  value,  while 
the  mortgages  of  plaintiff  were  assessed  at  the  nominal 
value  of  the  debts,  that  is,  at  the  full  value, ^  the  court 
said  that  it  was  not  necessary  to  make  the  assessment 
illegal  that  there  should  be  an  actual  conspiracy'  or  express 
design  on  the  part  of  the  assessors  to  disregard  the  law, 
adding :  — 

""Whenever  the  assessor  of  a  district  of  a  country  as 
large  as  one  of  these  counties  uniformly  estimates  real 
property   at   only   one-third   of   the   value    he    places    on 

1  The  decision  in  the  United  States  Circuit  Court,  by  Judge  Claris, 
is  based  directly  upon  the  violation  of  the  equal  protection  of  the 
laws  under  the  Fourteenth  Amendment,  86  Fed.  Rep.  1G8.  See  also 
Trustees  of  the  Cincinnati  Southern  R.  R.  Co.  v.  Guenther,  Trustee, 
19  Fed.  Rep.  395. 

2  See  §  296. 

3  Dundee  Mortgage  &  Inv.  Co.  v,  Parrish,  24  Fed.  Rep.  197;  see  also 
California  &  Oregon  Land  Co.  v.  Gowan,  48  Fed.  Rep.  771. 


628  EQUALITY  IX  VALUATION  FOR  TAXATION.  §   476 

mortgages,  it  is  impossible  to  attribute  the  result  to  the 
infirmity  of  human  judgment,  and  the  only  conclusion 
jDossible  in  the  premises  is  that  it  was  deliberately  and 
wilfully  done  in  pursuance  of  a  settled  puipose  or  rule  on 
his  part ;  and  where  the  same  thing  occurs  in  a  number  of 
counties  in  various  parts  of  the  State  it  is  manifest  that  the 
action  of  the  assessors  is  not  only  wilful  and  deliberate,  but 
that  it  is  the  result  of  general  and  well-understood  custom 
to  substitute  this  conventional  value  of  real  property  for 
'the  true  cash'  one  which  the  statute  requires. "i 

§  476.  Chicago  franchise  tax  cases. 

A  recent  and  interesting  application  of  the  Fourteenth 
Amendment  against  discriminating  valuation  was  made  by 
the  United  States  Circuit  Court  in  Illinois,  as  a  sequence  to 
the  franchise  tax  litigation  instituted  by  the  Institute  of 
Public  School  Teachers  of  Chicago  against  the  public 
utility  companies  of  that  city. 

The  constitution  of  Illinois  provided  that  the  value  of 
property  should  be  ascertained  as  directed  by  the  general 
assembly,  and  according  to  the  statute  the  capital  stock 
of  corporations  was  to  be  valued  by  the  State  Board  of 
Equalization  so  as  to  determine  its  "fair  cash  value." 
The  Supreme  Court  of  the  State  afiirmed  the  judgment  of 
the  Circuit  Court  directing  a  mandamus  against  the  State 
Board,   requiring  the   board    to    determine    the  valuation 

1  The  court  said  in  its  opinion  that  the  practice  was  so  universal  and 
well  known  in  Oregon  that  the  court  could  take  judicial  notice  of  it  and 
safely  assume,  that  there  was  not  an  acre  of  land  in  Oregon  valued  for 
taxation  at  more  than  one-half  of  its  true  value.  Generally  it  was  not 
valued  at  more  than  one-third  of  its  value.  As  personal  property,  espe- 
cially money,  is  more  liable  to  escape  taxation  than  land,  therefore,  in  a 
country  governed  largely  by  land  owners,  like  Oregon,  there  was  more 
or  less  undei'valuation  of  land,  upon  the  plea,  more  understood  than  ex- 
pressed, that  this  was  the  only  way  to  keep  even  with  moneyed  capital 
of  the  country  and  secure  something  like  equality  of  burden. 


§   476  EQUALITY  IN  VALUATIOX  FOR  TAXATION.  629 

of  the  stock  and  franchises  of  the  defendant  companies, 
by  including  in  such  vahiation  the  indebtedness  of  the 
companies  and  not  deducting  therefrom  the  amounts  paid 
to  the  municipahty  as  compensation  for  the  use  of  the 
franchises.!  The  court  said  that  it  was  proper  for  the 
board,  in  ascertaining  the  fair  cash  vakie  of  the  capital 
stock,  to  add  the  market  or  fair  cash  value  of  the  shares 
to  the  market  or  fair  cash  value  of  the  debt  of  the  corpo- 
rations, excluding  the  indebtedness  for  current  expenses. 
After  the  issue  of  this  mandamus,  suit  was  instituted 
in  the  United  States  Circuit  Court  by  certain  public 
utility  companies  of  Chicago,  street  railway  companies 
and  others,  claiming  that  the  State  Board  of  Equalization 
was  about  to  proceed  to  assess  their  property  in  violation 
of  the  Fourteenth  Amendment  to  the  Constitution  of  the 
United  States,  by  valuing  their  property  at  a  higher  rate, 
that  is,  at  a  higher  proportion  of  its  valuation,  than  other 
taxables  in  the  State.  Upon  the  first  application  for  an 
injunction,  the  court  held  that  there  was  nothing  in  the 
Illinois  statute  for  the  assessment  and  taxation  of  corpora- 
tions which  denied  the  equal  protection  of  the  laws,  and  that 
it  could  not  assume  that  the  Board  of  Equalization  would 
so  administer  the  law  as  to  discriminate  against  plaintiff ,2 
adding,  at  page  614:  "  If  it  transpires  that  the  Board  of 
Equahzation,  through  pique,  or  under  the  lash  and  spur  of 
some  external  power,  or  through  personal  fear,  or  moved 
by  any  other  consideration  than  the  impartial  and  inde- 
pendent discharge  of  its  own  duty,  attempts  to  certify  an 
assessed  valuation  that  in  its  effect  would  be  a  fraud  upon 
any  taxpayer,  the  courts  still  remain  open  to  the  injured 
taxpaj^er."  The  court  denied  the  motion  for  preliminary 
injunction,  but  retained  the  case. 

1  State  Board  of  Equalization  v.  People,  191  111.  528. 

2  Chicago  Union  Traction  Co.  v.  State  Bd.  of  Equalization,  112  Fed. 
Rep.  607. 


630  EQUALITY  IN  VALUATION  FOR  TAXATION.  §    476 

Thereafter,  on  full  hearing,!  jt  appeared  that  the  Board 
of  Equalization,  proceeding  under  the  mandate  of  the 
Supreme  Court,,  had  reassessed  the  capital  stock  of  certain 
corporations  and  their  franchises  for  the  year  1900,  from 
thirty  to  forty-seven  per  cent  higher  than  the  assessment 
of  such  corporations  in  1901,  the  assessment  for  the  latter 
year  having  been  made  before  the  hearing.  The  court 
(Judges  Grosscup  and  Humphrey)  said  that  they  were 
convinced  from  the  record  that  the  assessment  of  other 
property  throughout  the  State  for  the  year  1900,  as  finally 
equalized  by  the  State  Board  of  Equalization,  did  not 
exceed  seventy  per  cent  of  the  cash  value,  and  that 
such  standard  was  not  adopted  by  the  State  Board  unin- 
tentionally or  inadvertently,  but  deliberately  as  a  means 
of  arriving  at  an  equalization  of  taxable  values  through- 
out the  State.  Under  the  constitution  of  the  State,  uni- 
formity was  the  dominating  mandate.  It  .is  the  prime 
maxim,  said  the  court,  in  almost  every  system  of  taxa- 
tion, where  justice  and  fair  play  are  sought.  The  re- 
assessment of  the  complaining  corporation  for  1900  was  a 
close  approximation  to  the  aggregate  of  its  indebtedness 
and  of  its  stock  value  as  measured  by  the  stock  market 
quotations  for  April  1,  1900.  The  board  appeared  to  have 
adopted  these  quotations  as  its  own  standard  in  making  the 
reassessments,  which  accordingly  did  not  indicate  its  really 
independent  judgment.  The  stock  exchange  record  for 
that  one  day  out  of  the  year  was  an  arbitrary  standard,  to 
which  the  board  was  not  restricted  by  the  decision  of  the 
Supreme  Court  in  the  -mandamus  case.  The  court  said  fur- 
ther that  when  the  cash  value  had  been  ascertained,  there 
should  have  been  such  deduction  as  would  have  equalized 
the  valuation  with  that  placed  upon  other  property  in  the 
State. 

1  Chicago  Union  Traction  Co.  v.  State  Board  of  Equalization,  114  Fed. 
Rep.  557. 


§   477  EQUALITY  IN  VALUATION  FOR  TAXATION.  631 

§  477.  Valuation  by  capitalization  of  net  earnings. 

The  court  thereupon  declared  what  it  deemed  the  correct 
principle  in  ascertaining  the  fair  cash  value  of  public 
utility  or  quasi  public  corporations.  This  consisted  in 
taking  the  net  earnings  for  1900,  which  did  not  appear  to 
have  been  an  exceptional  year,  as  the  basis  of  the  valua- 
tion, and  capitalizing  them  at  the  rate  of  six  per  cent.  It 
was  said  that  the  data  as  to  these  net  earnings  was  obtained 
from  the  books  of  the  companies,  kept  for  the  informa- 
tion of  stockholders,  and  not,  apparently,  with  reference 
prospectively  to  tax  valuation.  An  annual  reduction  equal 
to  six  per  cent  of  the  current  value  of  cars,  tracks  and 
machinery  was  not  excessive  as  the  allowance  for  current 
depreciation.  The  net  earnings  should  take  into  account 
also  the.  increased  rate  of  taxation  for  the  year  1900 
caused  by  the  reassessments.  As  to  the  ratio  of  capitali- 
zation, the  court  fixed  the  rate  of  six  per  cent  as  the  rate 
adopted  in  States  where  assessments  were  made  upon  the 
basis  of  net  earnings,  saying  that  this  was  less  than  the 
rate  that  some  advanced  advocates  of  municipal  ownership 
were  willing  to  guarantee  to  investors  in  securities  of  this 
character,  but  it  was  deemed  justified  by  the  considerations 
that  attended  the  real  investor's  purchases  of  stock.  The 
cash  value  having  been  thus  ascertained,  a  deduction  of 
thirty  per  cent  was  made  therefrom  to  equalize  the  assess- 
ment with  the  assessment  of  other  property  in  the  State, 
according:  to  the  rate  of  assessment  fixed  as  a  standard 
by  the  board  of  equalization.  The  amount  thus  ascer- 
tained was  divided  by  five,  in  accordance  with  the 
State  law  directing  that  all  valuations  should  be  thus 
divided,  and,  to  the  remaining  fifth,  the  value  of  the  tan- 
gible property  was  added.  The  sum  was  to  be  the  assessed 
value  for  taxation.! 

1  In  the  case  of  one  street  railway  company  no  net  earnings  were 
shown,  that  is  the  road  seemed  to  have  been  operated  at  a  loss.    There- 


632  EQUALITY  IN  VALUATION  FOR  TAXATION.  §   478 

The  assessment  thus  having  been  reduced  some  eighteen 
million  dollars,  the  court  allowed  an  injunction  on  payment 
of  the  taxes  on  the  reduced  amount.  It  was  held  that 
there  was  no  basis  for  the  allowance  of  interest  and 
penalties. 

§  478.  Inequality  of  valuation  as  a  Federal  question. 

In  these  Illinois  cases  there  was  no  adverse  citizen- 
ship, and  jurisdiction  was  based  solely  on  the  Federal 
question  involved.  There  was  no  evidence  of  fraud  in  the 
sense  of  corruption.  The  court  was  not  concluded  by  the 
decision  of  the  Supreme  Court  of  the  State  in  the  man- 
damus case,  as  the  companies  assessed  were  not  parties  to 
that  proceeding,  and  the  question  of  discrimination  was 
not  involved  therein.  The  court  said  with  reference  to 
this  Federal  question,  that  any  substantial  departure  from 
the  law  in  laying  and  distribution  of  taxes  was  a  depriving 
of  a  citizen  of  his  property  without  due  process  of  law. 
In  this  sense  the  deprivation  of  property  without  due  pro- 
cess of  law  is  the  denial  of  the  equal  protection  of  the 
laws. 

It  follows  therefore  that,  where  there  is  habitual  and 
intentional  discrimination  in  the  valuation  of  property, 
resulting  in  substantial  inequality  of  taxation,  there  is  a 
denial  of  the  equal  protection  of  the  laws.  The  discrim- 
ination must  not  be  sporadic  or  occasional,  but  substantial ; 
that  is,  the  relative  undervaluation  must  extend  to  a  large 
class  of  individuals  or  corporations,  and  not  solely  to  one 
individual  or  corporation.  It  is  immaterial  however  that 
the  discrimination  is  aimed  only  against  one  individual  or 
class,  as  the  equal  protection  of  the  laws  requires  that  no 
person  or  class  of  persons  shall  be  denied  the  same  protec- 
tion of  the  laws,  which  is  enjoyed  by  other  persons  and 

fore  the  court  said  that  there  was  no  basis  upon  which  to  assess  the 
stock  over  and  above  the  tangible  property. 


§  478       EQUALITY  IN  VALUATION  FOR  TAXATION.      633 

other  classes  in  the  same  place    and  under  like   circum- 
stances. 

The  State  may  classify  and  specialize  in  taxation  (see 
Chapter  XV)  and  thus,  if  the  classification  is  natural  and 
reasonable,  subject  different  classes  to  different  rates  of 
taxation.  It  is  true  that  the  same  result  would  be  effected 
by  a  difference  in  the  rate  of  valuation  as  by  a  difference  in 
the  rate  of  the  tax.  On  account  of  the  difficulty  of  reach- 
ing personal  property,  and  particularly  intangible  personal 
property,  for  taxation,  there  is  a  very  general  disposition 
on  the  part  of  the  assessors,  frequently  commented  on  by 
the  courts,  to  value  such  property  higher  than  real  estate, 
which  cannot  be  concealed.  It  is  also  true  that  some 
forms  of  personal  property,  such  as  money  and  securities 
and  standard  marketable  articles,  have  a  definite  standard 
of  value  which  real  estate  has  not.  In  soine  States  deduc- 
tions for  debts  are  allowed  from  assessments  of  personal 
property,  and  in  some  from  credits  only.  These  consider- 
ations may  all  influence  assessors,  and  doubtless  do  so 
influence  them,  in  discriminating  valuations.  But  whether 
or  not  such  considerations  may  afford  a  valid  basis  for 
classification,  it  is  clear  that  such  classification  when 
authorized  by  the  State  constitution  can  only  be  made  by 
the  legislative  power,  and  cannot  be  made  by  the  arbitrar}'^ 
action  of  assessors.  Such  arbitrary  discriminations  by 
assessors  between  different  classes  of  property  in  valuations 
for  taxation  are  violative  of  due  process  of  law  as  well  as 
of  the  equal  protection  of  the  laws.^ 

1  As  to  such  discriminations  see  Dundee  Mortgage  and  Investment 
Co.  V.  Parrish,  siipra,  §  475;  see  also  National  Bank  v.  New  York,  64  N. 
E.  Rep.  756,  where  the  N.  Y.  Court  of  Appeals  held  that  the  assessment 
of  bank  stock  and  other  personal  property  at  full  value,  while  real 
estate  was  assessed  at  60%,  did  not  warrant  injunctive  relief.  The  case 
involved  a  question  of  procedure,  and  the  decision  also  seems  to  have 
recognized  the  existence  of  legislative  authority  for  the  discriminating 
valuations. 


CHAPTER     XYII. 

THE  TAXING  POWER  OF  CONGRESS. 

479.  Taxing  power  of  Congress  granted  by  Constitution. 

480.  Purpose  for  which  taxing  power  may  be  exercised. 

481.  Appropriation  of  public  money. 

482.  Supreme  Court  on  bounty  legislation. 

483.  Moral  and  equitable  claims  as  ''  debts." 

484.  Conclusiveness    of  legislative    determination    as    to    what    are 

"debts." 

485.  Taxes,  duties,  imposts  and  excises. 

486.  What  are  direct  taxea. 

487.  Inheritance  tax  not  direct  tax. 

488.  Direct  taxation  in  economic  sense  and  constitutional   sense  dis- 

tinguished. 

489.  Direct  tax  defined  by  Supreme  Court  in  Knowltonv.  Moore. 

490.  Taxing  power  of  Congress  co -extensive  with  territory  of  United 

States. 

491.  Uniformity  in  Federal  taxation. 

492.  Uniformity  in  levy  of  duties. 

493.  Levying  duties  under  the  war  power. 

494.  Uniformity  clause  as  applied  to  territorial  acquisitions. 

495.  Insular  decisions. 

496.  Tax  upon  exports. 

497.  Tax  on  foreign  bills  of  lading  is  tax  on  exports. 

498.  Porto  Rican  Tariff  of  1900  not  tax  on  exports. 

499.  Act  conferring  reciprocity  powers  on  President  sustained. 

500.  Taxing  power  of  Congress  with  reference  to  treaty  power. 

501.  State    instrumentalities    and     agencies    exempt    from    Federal 

taxation. 

502.  State  securities  are  not  exempt  from  Federal  inheritance  taxes. 

503.  Federal  securities  subject  to  Federal  Inheritance  taxes. 

504.  Taxing  power  of  Congress  and  State  authority. 

505.  Taxing  power  of  Congress  and  State  franchises. 
606.  Taxing  power  of  Congress  and  police  power  of  State. 

507.  Municipal  corporations  subject  to  internal  revenue  taxation. 

508.  Diminution  of  salaries  by  taxation. 

509.  Progressive  taxation. 

510.  Scope  of  Federal  taxing  power. 

511.  Taxing  power  of  Congress  in  relation  to  interstate  commerce. 

512.  Congress  may  increase  excise  as  well  as  property  tax. 
(634) 


§   479  THE  TAXING  POWER  OF  CONGRESS.  635 

§  513.  Taxation  of  properly  of  non-resident  aliens. 

514.  Taxation  of  property  of  residents  invested  abroad. 

515.  The  taxing  power  of  Congress  over  Territories. 
616.  Taxation  in  District  of  Columbia. 

517.  Power  of  Congress  in  enforcing  collection  of  taxes. 

Art.  I,  Sections  of  the  Constitution  of  the  United  States: — 

"Sections.  The  Congress  shall  have  power:  To  lay  and  collect  taxes, 
duties,  imposts  and  excises,  to  pay  the  debts,  and  provide  for  the 
common  defence  and  general  welfare  of  the  United  States;  but  all 
duties,  imposts  and  excises,  shall  be  uniform  throughout  the  United 
States." 

Art.  I,  Sec.  9,  paragraph  4:  — 

"No  capitation,  or  other  direct  tax  shall  be  laid,  unless  in  pro- 
portion to  the  census  or  enumeration  hereinbefore  directed  to  be 
taken." 

Art.  I,  Sec.  9,  paragraph  5 : — 

"  No  tax  or  duty  shall  be  laid  on  articles  exported  from  any  State." 

§  479.  Taxing  power    of  Congress    granted    by  Constitu- 
tion. 

The  Constitution  of  the  United  States,  while  restraining, 
expressly  and  by  necessary  implication,  the  taxing  power 
of  the  States,  grants  certain  taxing  powers  to  Congress. 
As  the  Federal  irovernment  under  the  Constitution  is  one 
of  delegated  powers,  we  must  find  the  taxing  power  of 
Congress  in  the  express  or  implied  grants  of  the  Constitu- 
tion.    Thus  it  is  said  by  Justice  Story :  i  — 

"  The  ofovernment  of  the  United  States  can  claim  no 
powers  which  are  not  granted  to  it  by  the  Constitution, 
and  the  powers  actually  granted  must  be  such  as  are  ex- 
pressly given,  or  given  by  necessary  implication." 

There  is  no  power  of  taxation  inherent  in  the  United 
States,  as  there  is  in  the  States.  The  most  serious  vice  of 
the  Confederation  was  the  absence  of  power  in  Congress  to 
raise  its  own  revenue  for  the  execution  of  its  powers.     The 

1  Martin  v.  Hunter,  1  Wheaton  304, 1.  c.  326. 


636  THE  TAXING  POWER  OF  CONGRESS.  §  480 

Constitution  therefore  granted  to  Congress  specific  powers 
of  taxation  dealing  directly  with  the  subject  of  taxation,  ex- 
clusive as  to  duties  on  foreign  imports,  and  concurrent  with 
the  States  in  internal  taxation,  subject  to  the  qualifications  of 
uniformity  and  apportionment  in  the  exercise  of  these  pow- 
ers thus  granted,  as  stated  in  the  clauses  quoted.  In  his 
opinion  in  Gibbons  v.  Ogden,i  Chief  Justice  Marshall 
distinguished  between  this  concurrent  power  of  taxation 
and  the  power  to  regulate  commerce,  saying  that  the 
exercise  of  the  taxing  power  by  Congress  does  not  inter- 
fere with  the  power  of  the  State  to  tax  for  the  support 
of  its  own  government,  and  that,  when  each  exercises  the 
power  of  taxation,  neither  is  exercising  the  power  of  the 
other. 

§  480.  Purpose    for  which  taxing  power  may  be    exer- 
cised. 

It  seems  to  be  settled  that  the  words  in  Article  I,  Sec- 
tion 8,  above  quoted,  "  To  pay  the  debts  and  provide  for 
the  common  defence  and  general  welfare  of  the  United 
States,"  do  not  grant  a  distinct  power  to  Congress,  but 
simply  declare  the  object  of  the  taxing  power  preceding, 
so  that  the  clause  is  equivalent  to  the  following:  "Con- 
gress shall  have  power  to  lay  and  collect  taxes,  duties, 
imposts  and  excises,  in  order  to  pay  the  debts  and  pro- 
vide for  the  common  defence  and  general  welfare  of  the 
United  States."  Congress  therefore  has  not  an  unlimited 
power  as  to  the  purpose  of  taxation,  and  can  levy  taxes 
only  for  these  specific  objects. 2 

1  See  supra,  §  101. 

2  Story's  Commentaries  on  the  Constitution,  vol.  1,  sec.  907.  He 
says  that  the  view  that  paying;  the  debts  and  providing  for  the  common 
defense  and  general  welfare  constitutes  another  substantial  power, 
distinct  from  the  power  to  tax,  would  make  the  government  one  of 
general  and  unlimited  powers,  and  that,  while  this  view  has  been  main- 


§  480  THE  TAXING  POWER  OF  CONGRESS.  637 

This  limitation  of  the  purposes  for  which  taxes  may  be 
levied  by  Congress,  while  historically  interesting,  is  really 
addressed  to  the  legislative  discretion  rather  than  to  the 
judicial  power,  for  the  reason  that  the  specific  purposes  for 
which  the  proceeds  of  taxes  are  to  be  expended  are  not 
declared  in  the  Acts  of  Congress  levying  them,  and  the 
courts  cannot  look  beyond  the  acts  themselves  to  discover 
those  purposes.  The  same  principle  applies  in  the  judicial 
review  of  the  purposes  for  which  State  taxes  are  levied,  and 

tained  by  minds  of  great  ingenuity  and  liberality,  the  contrary  opinion 
has  been  the  generally  received  sense  of  the  nation,  and  seems  supported 
by  reasoning  at  once  solid  and  impregnable.  He  says  also,  sec.  926,  that 
the  argument  in  favor  of  the  restricted  construction  has,  perhaps,  never 
been  presented  in  a  more  precise  and  forcible  shape  than  in  the  official 
opinion  of  Mr.  JefEerson  on  the  proposed  Bank  of  the  United  States, 
February  16,  1791,  as  follows:  ''For  the  laying  of  taxes  is  the  power, 
and  the  general  welfare  the  purpose  for  which  the  power  is  to  be  exer- 
cised. Congress  is  not  to  lay  taxes  ad  libitum  for  any  purpose  they 
please;  but  only  to  pay  the  debts  or  provide  for  the  welfare  of  the 
Union.  In  like  manner  they  are  not  to  do  anything  they  please,  to  pro- 
vide for  the  general  welfare,  but  only  to  lay  taxes  for  that  purpose." 
7th  Jefferson's  Works  757. 

In  this  construction  Mr.  Hamilton  agreed,  see  Report  on  Manufac- 
tures^ where  he  contends  that,  while  the  power  to  lay  taxes  is  confined 
to  purposes  for  the  common  defense  and  general  welfare,  the  power  of 
appropriation  of  public  moneys  is  co-extensive,  that  is,  that  it  may  be 
applied  to  any  purposes  for  the  common  defense  and  general  welfare. 
The  late  Justice  Miller  in  his  Lectures  on  the  Constitution,  says,  page 
230:  "At  one  time  I  did  not  concur  in  this  peculiar  manner  of  punctu- 
ating this  instrument  by  commas  and  semicolons,  without  a  period 
coming  in  between  the  opening  words  of  this  8th  section,  'Congress 
shall  have  power,'  and  the  18th  clause  with  which  it  concludes.  This 
clause,  however,  in  regard  to  paying  the  debts  and  providing  for  the 
common  defense  and  general  welfare  constitutes  a  proper  qualification 
of  the  power  to  collect  taxes,  and  in  what  may  be  called  the  same 
sentence  is  followed  by  the  limitation  requiring  all  duties,  excises  and 
imposts  to  be  uniform,  so  that  it  seems  probable  that  the  meaning  is 
that  Congress  shall  have  power  to  lay  these  taxes  and  collect  them  in 
order  '  to  pay  the  debts  and  provide  for  the  common  defence  and  general 
welfare.'  " 

See  also  John  Randolph  Tucker's  Commentaries  on  the  Constitution  of 
the  United  States,  sec.  222. 


638  THE    TAXING    POWER    OF    CONGRESS.  §   480 

such  questions  in  the  courts  have  usually  related  to  the 
validity  of  municipal  bonds,  for  the  payment  of  which 
taxation  is  required.^  , 

Under  the  permanent  revenue  system  of  the  govern- 
ment,2  taxes  are  levied,  not  for  specific  purposes,  but  by 
continuing  laws  establishing  the  rate  of  customs  duties  and 
internal  revenue  taxes,  and  questions  relating  to  the  lawful 
purposes  of  taxation  do  not  arise  in  the  levying  of  taxes, 
but  in  the  appropriation  of  public  funds  for  public  needs. 
The  power  of  taxation  is  sometimes  invoked  with  no 
purpose  of  revenue  in  view,  but  solely  to  destroy  the 
interest  or  business  upon  which  the  tax  is  levied,  by  taxing 
it  out  of  existence.  Thus  the  tax  upon  the  State  bank 
notes  was  imposed  to  destroy  their  use,  so  as  to  open  the 
means  for  circulating  the  notes  of  the  national  banks.'' 
While  the  only  lawful  purpose  of  taxation  is  revenue,  the 
amount  of  the  tax  on  any  subject  within  the  scope  of  the 
taxing  power  is  for  the  legislative  discretion  to  determine. 
"  It  is  a  perplexing  inquiry  unfit  for  the  judicial  depart- 
ment, what  degree  of  taxation  is  the  legitimate  use  and  what 
degree  may  amount  to  an  abuse  of  the  power."  *  A  legis- 
lator may  therefore  vote  against  an  act,  which  he  as  a  legis- 
lator deems  unauthorized  by  the  Constitution,  and  yet  as  a 
judge  he  might  be  compelled  to  sustain  the  same  act  as  an 
exercise  of  legislative  discretion  not  subject  to  judicial  review.^ 

1  See  Chapter  XII,  on  Public  Purpose  of  Taxation. 

2  As  to  permanent  tax  laws,  see  Tucker  on  Constitutional  Law,  Sees. 
239  and  240.  He  says  that  our  system  of  permanent  tax  laws  destroys 
the  relation  between  taxation  and  representation.  For  difference  be- 
tween English  and  American  practice  as  to  revenue  bills,  see  Miller's 
Lectures  on  the  Constitution,  pages  203  to  208. 

3  See  infra,  §  505. 

■*  Chief  Justice  Marshall  iu  McCulloch  v.  Maryland,  4  Wheaton,  438. 

^  In  the  54th  Congress  the  extent  of  the  taxing  power  of  Congress  in 
suppressing  industries  was  discussed  in  connection  with  the  attempted 
passage  of  the  so-called  '^  anti- option  "  bill,  proposing  to  tax  out  of 
existence  the  dealings  in  "options"  and  "futures."  Some  held  that 
the  taxing  power  was  inadequate  and  relied  on  the  commerce  clause. 


§   481  THE  TAXING  POWER  OF  CONGRESS.  639 

§  481.  Appropriation  of  public  money. 

The  Constitution  provides  ^  that  no  money  shall  be  drawn 
from  the  treasury  but  in  consequence  of  appropriations  made 
by  law.     In  the  exercise  of  this  power  of  appropriation,  or 
the  expenditure  of  the  proceeds  of  taxation,  there  could  be 
no  question  as  to  two  of  the  three  authorized  objects  of  ex- 
penditure, the  payment  of  the  debts,  and  the  providing  for 
the  common  defense.     There  was  however  a  great  differ- 
ence  in   the   opinions    of  the   great   master-minds  in  the 
formation  and  defense  of  the  Constitution,    Hamilton  and 
Madison,  as  to  the  power  of  Congress  to  appropriate  "  for 
the    general    welfare  of  the  United  States."     Thus  Mr. 
Madison  held  that  the  words  "  general  welfare,"  as  a  gen- 
eral description  of  the   objects  of  the  taxing   power,  were 
limited  by  and  commensurate  with  the  objects  of  the  Con- 
stitution as  defined  in  the  enumerated  powers  specified,  and 
that  there  can  be  no  general  welfare  intended  by  the  Con- 
stitution beyond  what  Congress  has  power  to  create,  regu- 
late and  control  by  virtue  of  the  enumerated  powers.     On 
the    other   hand,  it  was   held   by  Mr.  Hamilton   that  the 
words,  "general   welfare  "  include,  not  only  the  enumer- 
ated  powers  of  the  Constitution,  but  whatever   Congress 
may  deem  to  be  for  the  general  welfare.^ 

1  Article  I,  Sec.  9,  Par.  6. 

2  Justice  Story  said,  1  Story  on  Const.,  Sec.  958,  of  this  and  the  other 
question  arising  out  of  this  same  grant  to  Congress  of  its  taxing  power, 
viz.:  "Whether  the  government  has  a  right  to  lay  taxes  for  any  other 
purpose  than  to  raise  revenue,  however  much  that  purpose  may  be  for 
the  common  defense,  or  general  welfare,"  that  each  of  these  ques- 
tions had  given  rise  to  much  animated  controversy.  The  former 
involves  the  question  whether  Congress  can  lay  taxes  to  protect  and 
encourage  domestic  manufactures;  the  latter,  whether  Congress 
can  appropriate  money  to  internal  improvements.  "  Each  has  been 
aflarmed  and  denied,  with  great  pertinacity,  zeal  and  eloquent  reasoning; 
each  has  become  prominent  in  the  struggles  of  party ;  and  defeat  in  each 
has  not  hitherto  silenced  opposition,  or  given  absolute  security  to  vic- 
tory.   The  contest  is  often  renewed ;  and  the  attack  and  defense  main- 


640  THE  TAXING  POWER  OF  CONGRESS.         §  481 

But  this  question  of  the  limitation  of  the  legislative 
power  in  appropriation,  for  the  reasons  already  stated,  is 
political  rather  than  judicial,  and  the  subject  has  become, 
from  a  legal  point  of  view,  academic  rather  than  practical 
since  the  decision  of  the  Supreme  Court  in  McCulloch  v. 
Maryland,  wherein  the  court  held  that  Congress  could 
establish  a  bank,  although  there  was  no  authority  given  it 
in  the  enumerated  powers  of  the  Constitution  to  create  a 
corporation  of  any  kind.  The  court  said  that  the  great 
powers  to  lay  and  collect  taxes,  to  borrow  money,  to  regu- 
late commerce,  to  declare  and  conduct  war  and  support 
armiep  and  navies  carry  with  them  the  selection  of  the 
means  for  those  great  ends,  saying  at  page  415:  "To 
have  prescribed  the  means  by  which  government  should,  in 
all  future  time,  execute  its  powers,  would  have  been  to 
change,  entirely,  the  character  of  the  instrument,  and  give 
it  the  properties  of  a  legal  code." 

The  court  called  attention  to  the  concluding  clause  of  the 
eighth  section  of  Article  I,  giving  the  power  to  make  all 
laws  necessary  and  proper  for  the  carrying  into  execution 
the  preceding  powers,  and  said,  at  page  420 :  — 

' '  The  result  of  the  most  careful  and  attentive  considera- 
tion bestowed  upon  this  clause  is,  that  if  it  does  not  enlarge, 
it  cannot  be  construed  to  restrain  the  powers  of  Congress, 
or  to  impair  the  right  of  the  legislature  to  exercise  its  best 
judgment  in  the  selection  of  measures  to  carry  into  execu- 
tion the  constitutional  powers  of  the  government.     If  no 

tained  with  equal  ardor.  In  discussing  this  subject,  we  are  treading 
upon  the  ashes  of  yet  unextinguished  fires,  incedimus  per  ignes  suppositos 
cineri  doloso.^^ 

The  question  was  practically  determined  by  Congress  in  the  matter  of 
internal  improvements,  that  while  it  could  not  constitutionally  build 
canals  and  other  works  of  internal  improvement,  it  could  appropriate 
money  therefor.  For  the  Hamiltonian  view,  see  Report  on  Manufactures. 
For  Mr.  Madison's  view,  see  veto  message,  March  3,  1817.  For  a  thorough 
review  of  the  subject  from  an  anti- Hamiltonian  view,  see  John  Randolph 
Tucker's  Commentaries  on  the  Constitution,  vol.  1,  sec.  234,  et  seq. 


§  482        THE  TAXING  POWER  OF  CONGRESS.  641 

other  motive  for  its  insertion  can  be  suggested,  a  sufficient 
one  is  found  in  the  desire  to  remove  all  doubts  respecting 
the  right  to  legislate  on  that  vast  mass  of  incidental  powers 
which  must  be  involved  in  the  Constitution,  if  that  instru- 
ment be  not  a  splendid  bauble. 

"We  admit,  as  all  must  admit,  that  the  powers  of  the 
government  are  limited,  and  that  its  limits  are  not  to  be 
transcended.  But  we  think  the  sound  construction  of  the 
Constitution  must  allow  to  the  national  legislature  that  dis- 
cretion, with  respect  to  the  means  by  which  the  powers  it 
confers  are  to  be  carried  into  execution,  which  will  enable 
that  body  to  perform  the  high  duties  assigned  to  it,  in  the 
manner  most  beneficial  to  the  people.  Let  the  end  be  legit- 
imate, let  it  be  within  the  scope  of  the  Constitution,  and  all 
means  which  are  appropriate,  which  are  plainly  adapted  to 
that  end,  which  are  not  prohibited,  but  consist  with  the 
letter  and  spirit  of  the  Constitution,  are  constitutional." 

§  482.  Supreme  Court  on  bounty  legislation. 

The  practical  difficulty  in  the  review  by  the  judiciary  of 
the  congressional  discretion  in  the  appropriation  of  public 
funds,  is  illustrated  in  the  history  of  the  bounty  clause  in 
the  Tariff  Act  of  1890.  This  provided  for  payment  from 
the  treasury  of  the  United  States  to  the  producers  of  beet 
sugar  of  a  bounty  of  two  cents  or  one  and  three-quarter 
cents  per  pound,  according  to  the  grade  of  the  sugar.  The 
constitutionality  of  this  bounty  was  gravely  doubted,  and 
it  was  contended  that  the  provision  was  void  under  the  rule 
declared  in  Loan  Association  v.  Topeka.i  But  the  Supreme 
Court,  in  a  case  involving  the  validity  of  the  Tariff  Act  of 
1890,2  declined  to  pass  upon  the  constitutionality  of  this 
provision,  though  they  conceded  its  grave  importance,  say- 

1  See  supra,  Chapter  XII,  The  Public  Purpose  of  Taxation. 
«  Field  V.  Clark,  143  U.  S.  649. 

41 


642  THE  TAXING  POWER  OF  COXGRESS.  §   482 

ing,  1.  c.  p.  695,  "  it  would  be  difficult  to  suggest  a  ques- 
tion of  larger  importance  or  one  the  decision  of  which 
would  be  more  far-reaching."  The  court  said  that  even 
if  it  was  unconstitutional,  it  would  not  invalidate  the  other 
sections  of  the  tariff  act,  as  the  different  objects  had  no 
legal  connection  with  each  other. 

Subsequentljs  in  the  Tariff  Act  of  1894,  Congress  repealed 
this  bounty  provision,  enacting  that  thereafter  it  should  be 
unlawful  to  issue  any  licenses  or  pay  any  bount}^  for  the 
production  of  sugar  at  any  time.  It  seems  however  that 
when  this  repealing  act  was  passed,  certain  manufacturers 
had  taken  out  licenses  under  the  act  and  had  produced  and 
manufactured  the  sugar  on  the  faith  thereof,  but,  b}^  rea- 
son of  the  repeal  of  the  act,  were  unable  to  obtain  the 
money  from  the  treasury  on  the  warrants  which  had  been 
issued  to  them.  Congress  therefore  passed  an  act  in  1895 
appropriating  money  for  the  payment  of  those  manufac- 
turers and  producers  of  sugar,  who  had  complied  with  the 
act,  but  were  debarred  from  payment  by  reason  of  its 
repeal  in  1894.  It  seems  that  the  parties  who  were  entitled 
to  payment  under  this  act  were  few  in  number,  and  the 
appropriation  called  for  about  $250,000.  The  proper  dis- 
bursing officer  of  the  treasury  refused  to  pay  the  warrants 
drawn  pursuant  to  the  act,  upon  the  ground  that  the  act 
was  unconstitutional.  A  Louisiana  corporation,  entitled  to 
payment  under  this  act  of  1895,  applied  to  the  Supreme 
Court  of  the  District  of  Columbia  for  a  mandamus  against 
the  Secretary  of  the  Treasury  and  the  Commissioner  of  In- 
ternal Revenue,  to  compel  action  on  their  part  under  the 
act.  The  act  was  declared  unconstitutional  by  the  Court 
of  Appeals  of  the  District  of  Columbia,  on  the  ground  that 
the  bounty  provision  itself  was  unconstitutional  and  any 
appropriation    on   account   of  it   invalid.^     The  Supreme 

1  United  States  ex  rel.  v.  Carlisle,  6  D.  C.  App.  138. 


§  483  THE  TAXING  POWER  OF  CONGRESS.  643 

Court  1  avoided  any  decision  as  to  the  validity  of  the  bounty 
legislation  in  the  act  of  1890,  but  sustained  the  act  of  1895, 
as  within  the  constitutional  power  of  Congress  to  determine 
whether  claims  upon  the  public  treasury  are  founded  upon 
moral  and  honorable  obhgations  and  upon  principles  of 
right  and  justice.  When  it  has  decided  such  questions  iu 
the  affirmative,  and  has  appropriated  public  money  for  the 
payment  of  such  claims,  said  the  court,  "  its  decision  can 
rarely,  if  ever,  be  the  subject  of  review  by  the  judicial 
branch  of  the  government." 

§  483.  Moral  and  equitable  claims  as  **  debts.*' 

It  was  argued  in  this  case  that  there  could  be  no  valid 
claim  growing  out  of  an  unconstitutional  act.  But  the 
court  said  that  the  question  involved  was,  not  the  validity 
of  the  claim  under  the  unconstitutional  act,  but  whether 
honorable  considerations  could  arise  warrantinsf  the 
appropriation.  The  parties  whom  Congress  reimbursed 
could  not  be  held  to  know,  what  no  one  else  could  know 
prior  to  the  determination  of  that  fact  by  some  judicial 
tribunal,  that  the  bounty  law  was  unconstitutional.  The 
power  to  raise  money  to  pay  the  debts  of  the  United 
States  includes  the  power  to  appropriate  the  money  when, 
raised  for  that  object,  and  the  debts  of  the  United  States 
are  not  limited  to  those  evidenced  by  some  written  obliga- 
tion or  otherwise  of  a  strictly  legal  character.  The  court 
cited  instances  of  appropriations  of  like  character  since 
the  foundation  of  the  government,  and  said,  page  443  :  — 

"  Of  course,  the  difference  between  the  powers  of  the 
State  legislatitf-es  and  that  of  the  Congress  of  the  United 
States  is  not  lost  sight  of,  but  it  is  believed  that  in  relation 
to  the  power  to  recognize  and  to  pay  obligations  resting 
only    upon    moral    considerations    or   upon   the  general 

1  United  StatCi  v.  Realty  Co.,  163  U.  S.  427. 


644  THE  TAXING  PO^VER  OF  CONGRESS.  §  485 

principles  of  right  and  justice,  the  Federal  Congress  stands 
upon  a  level  with  the  State  legislature." 

§  484.  Conclusiveness    of   legislative    determination    as 
to  what  are  **  debts." 

The  decision  in  the  case  cited  establishes  not  only  the 
principle  that  the  term  *«  debts"  includes  those  debts  or 
claims  which  arise  upon  a  merely  honorary  obligation  and 
would  not  be  recoverable  in  a  court  of  law  if  existins: 
against  an  individual,  but  also  that  the  determination  of 
Congress  in  any  given  case  that  an  appropriation  is  war- 
ranted upon  such  honorable  and  moral  considerations  can- 
not be  reviewed  by  the  courts.  The  opinion  in  this  case 
is  interesting  and  important,  as  it  illustrates  the  practical 
difficulty  of  enforcing  in  any  case  the  constitutional  restric- 
tions as  to  the  purpose  for  which  taxes  can  be  levied. 
Thus  the  court  said  in  this  case  at  page  444 :  — 

' '  In  regard  to  the  question  whether  the  facts  existing  in 
any  given  case  bring  it  within  the  description  of  that  class 
of  claims  which  Congress  can  and  ought  to  recognize  as 
founded  upon  equitable  and  moral  considerations  and 
grounded  upon  principles  of  right  and  justice,  we  think 
that  generally  such  question  must  in  its  nature  be  one  for 
Congress  to  decide  for  itself.  Its  decision  recosnizino- 
such  a  claim  and  appropriating  money  for  its  payment  can 
rarely,  if  ever,  be  the  subject  of  review  by  the  judicial 
branch  of  the  government." 

§  485.  Taxes,  duties,  imposts  and  excises. 

The  power  to  tax  contained  in  Article  I,«6ection  8,  of  the 
Constitution  is  to  lay  and  collect  taxes,  duties,  imposts  and 
excises.  The  terms  "tax  "  and  " duty"  are  used  in  para- 
graph one  of  section  9  and  in  paragraph  5,  in  respect  to 
articles  exported.  The  term  "  duty  "  in  a  narrower  sense 
as  used  in  the  Constitution  relates  to  custom  duties,  and 


§  485  THE  TAXING  PO^^^:R  of  congress.  645 

has  been  held  equivalent  to  imposts.  Thus,  in  section  10 
of  Article  I  of  the  Constitution,  the  States  are  prohibited 
from  laying  any  imposts  or  duties  on  imports  or  exj^orts ; 
but  "duties,  imposts  and  excises"  in  section  8  are  distin- 
guished from  other  taxes  which  Congress  has  power  to 
levy,  in  the  requirement  that  they  shall  be  uniform  through- 
out the  United  States.^ 

An  excise  tax  has  been  defined  as  one  which  is  assessed 
upon  some  article  of  personal  property,  or  money,  orsome- 
thino-  which  is  exhausted  in  the  use.^  It  is  one  which  from 
its  essence  and  nature  must  be  paid  in  fact  by  the  last  man 
who  buys  and  uses  the  property,  because  whoever  has  it, 
at  the  time  when  the  tax  is  levied  upon  it,  adds  that  amount 
to  the  selling  price,  when  he  comes  to  dispose  of  it  or  the 
property  is  consumed.  From  its  derivation  (excidere — to 
cut  off)  it  means  a  tax  upon  specific  commodities,  paid  at 
some  time  between  the  manufacture  and  the  consumption. 
As  used  in  the  constitutional  grant  of  the  taxing  power  to 
Congress,  the  term  has  been  given  a  broader  meaning,  so 
that   it   includes  practically  all  taxes,  other  than  customs 

1  See  Story's  Corameataries,  Sec.  952;  Knowlton  v.  Moore,  178  U.  S. 
41,  87.  Mr  Madison  in  his  letter  on  the  tariff  of  Semptember  18,  1828, 
4  Elliot's  Debates  600,  says  as  to  these  different  terms  used  in  the  grant 
of  the  taxing  power :  — 

''  Pleonasms,  tautologies  and  the  promiscuous  use  of  terms  and 
phrases  difEering  in  their  shades  of  meaning  (and  always  to  be  ex- 
pounded with  reference  to  the  text  and  under  the  control  of  the  general 
character  and  manifest  scope  of  the  instrument  in  which  they  are  found) 
are  to  be  ascribed  sometimes  to  the  purpose  of  general  caution,  some- 
times to  the  imperfection  of  language,  and  sometimes  to  the  imperfec- 
tion of  man  himself.  In  this  view  of  the  subject  it  was  quite  natural, 
however  certainly  the  general  power  to  regulate  trade  might  include  a 
power  to  impose  duties  on  it,  not  to  omit  it  in  a  clause  enumerating  the 
several  modes  of  revenue  authorized  by  the  Constitution.  In  few  cases 
could  the  '  ex  majori  cautela  '  occur  with  more  claim  to  respect." 

The  term  '<  duty  "  is  used  sometimes  in  the  general  sense  of  tax —  as 
a  "stamp  duty." 

2  Miller's  Lectures  on  the  Constitution,  p.  238. 


646  THE  TAXING  POWER  OF  CONGRESS.  §  485 

duties,  which  are  not  direct  taxes  and  which  therefore  do 
not  require  to  be  levied  by  the  rule  of  apportionment.* 
Thus  taxes  on  inheritances,  on  commercial  exchange  sales 
and  stamp  taxes  of  all  kinds  have  been  held  to  be  excise 
taxes  within  the  meaning  of  the  Constitution. ^  In  the 
Head  Money  Cases, ^  the  tax  levied  by  Congress  on  the  busi- 
ness of  bringing  passengers  from  foreign  countries  was  held 
to  be  an  excise  duty  within  the  meaning  of  the  Constitution. 
The  tax  levied  by  Congress  on  manufactured  tobacco  is 
a  tax  on  an  article  manufactured  for  consumption  and  im- 
posed at  a  period  intermediate  the  commencement  of  the 
manufacture  and  the  final  consumption,  and  is  also  an  ex- 
cise tax  under  the  Constitution.*  In  the  case  last  cited,  the 
court  reviewed  the  different  definitions  of  the  term  ex- 
cise, including  that  of  Dr.  Johnson:  "  A  hateful  tax  levied 
upon  commodities,"  an  opinion  which,  the  court  says,  was 
evidently  shared  by  Blackstone,  who  said,  after  mention- 
ing the  number  of  articles  that  had  been  added  to  those 
excised,  that  it  was  "  a  list  which  no  friend  of  his  country 
would  wish  to  see  further  increased."  But  the  Supreme 
Court  said  that  these  are  considerations  of  policy  to  be  deter- 
mined by  the  legislative  branch,  and  not  of  power  to  be  de- 
termined by  the  judiciary.  All  of  the  taxes  enumerated  in 
the  various  statutes  for  the  collection  of  internal  duties  are 
not  excises,  but  the  great  body  of  them,  including  the 
tax  on  tobacco,  are  plainly  excises  within  the  accepted 
definition  of  the  term. 


1  In  Maine  v.  Grand  Trunk  R.  R.  Co.,  supra,  §  231,  the  term  "ex- 
cise" in  a  State  statute  was  held  properly  applicable  to  the  license  for 
the  exercise  of  corporate  privileges  in  the  State,  based  on  the  State's 
mileage  proportion  of  the  gross  earnings.  In  State  v.  Hamlin,  86  Maine 
495,  an  inheritance  tax  was  classed  as  an  excise  tax. 

2  Pacific  Ins.  Co.  v.  Soule,  7  Wall.  433;  Sholey  u.  Rew,  23  Wall.  331; 
Nicol  V.  Ames,  173  U.  S.  509;  Kuowlton  v.  Moore,  178  U.  S.  41. 

3  112  U.  S.  580. 

4  Patton  V.  Brady,  184  U.  S.  608. 


§  486  THE  TAXING  POWER  OF  CONGRESS.  647 

The  taxing  power  therefore  conferred  by  the  Constitu- 
tion upon  Congress,  it  has  been  repeatedly  held,  includes 
all  the  subjects  of  taxation,  under  three  express  restrictions : 
First,  direct  taxes  must  be  levied  according  to  the  rule  of 
apportionment;  second,  all  taxes  must  be  uniform  through- 
out the  United  States;  and  third,  no  tax  can  be  levied 
upon  exports.  These  are  the  express  limitations  upon  the 
exercise  of  the  general  taxing  power  granted  to  Congress. 
There  is  also  an  implied  limitation  to  this  general  grant, 
growing  out  of  the  relation  of  the  Federal  government  to 
the  States,  and  another,  it  has  been  claimed,  growing  out 
of  the  prohibition  in  the  Constitution  against  the  diminu- 
tion of  salaries  during  continuance  in  office. 

§  486,  What  are  direct  taxes. 

The  Constitution  provides,^  that  "  no  capitation  or  other 
direct  tax  shall  be  laid  unless  in  proportion  to  the  census 
or  enumeration  hereinbefore  directed  to  be  taken." 
Another  clause'-^  provides  that  "  representatives  and  direct 
taxes  shall  be  apportioned  among  the  several  States,  which 
may  be  included  within  this  Union,  according  to  their  re- 
spective numbers,  which  shall  be  determined  by  adding  to 
the  whole  number  of  free  persons,  including  those  bound 
to  service  for  a  term  of  years,  and  excluding  Indians  not 
taxed,  three-fifths  of  all  other  persons."  The  abolition  of 
slavery  made  the  "other  persons"  freemen,  and  it  was 
provided  by  the  second  section  of  the  Fourteenth  Amend- 
ment that  "  representatives  shall  be  apportioned  among  the 
several  States  according  to  their  respective  numbers,  count- 
ing the  whole  number  of  persons  in  each  State,  exclud- 
ing Indians  not  taxed."  No  change  was  made  by  the  Four- 
teenth Amendment  in  the  provision  for  the  apportionment 
of  direct  taxes. 

1  Article  I,  Section  9,  Par.  4. 

2  Article  I,  Sectioa  2,  Par.  3. 


648  THE  TAXING  POWER  OF  CONGRESS.  §   486 

Capitation  or  poll  taxes  and  other  direct  taxes  must 
therefore  be  apportioned  among  the  States,  each  of  which 
must  pay  according  to  its  population  and  not  according  to 
its  wealth. 1  The  view  was  first  entertained  that  the  only 
other  direct  tax,  besides  the  capitation  or  poll  tax,  was  a  tax 
upon  land,  and  inHylton  v.  United  States,^  which  appears 
to  have  been  the  first  decision  of  the  Supreme  Court  as  to 
the  taxing  power  of  Congress,  a  tax  upon  carriages  kept 
for  the  party's  own  use  was  held  not  to  be  a  direct  tax, 
and  therefore  not  required  to  be  levied  by  the  rule  of  ap- 
portionment. The  same  ruling  was  made  with  reference  to 
the  Income  Tax  of  1864,  levied  during  the  Civil  War,  which 
was  declared  to  be,  not  a  direct  tax,  but  an  excise  tax,  in  a 
case  involving  a  tax  on  income  from  professional  earnings 
and  from  United  States  bonds. ^ 

But  the  whole  subject  was  re-examined  in  connection 
with  the  Income  Tax  of  1894,  and  the  court  there,  upon 
full  consideration,  decided  that  the  tax  upon  incomes  from 
land  is  a  direct  tax,  the  same  as  if  levied  upon  the  land 
itself.  The  court  however  eight  justices  sitting,  was 
equally  divided  on  the  questions  of  whether  the  same  rule 
applied    to  incomes  from  personal  property  and   whether 

1  A  direct  tax  amounting  to  $20,000,000  -was  levied  by  Congress, 
August  5,  1861,  and  apportioned  to  ttie  States  in  proportion  to  the  popu- 
lation as  shown  by  the  census.  The  tax  was  levied  upon  lands  and  im- 
provements, the  public  prop'erty  of  States  and  the  United  States 
excepted.  It  was  held  in  United  States  v.  Louisiana,  123  U.  S.  32,  that 
the  act  imposed  no  obligation  upon  the  States  as  such,  though  the  States 
could  assume,  and  some  did  assume,  the  amounts  apportioned.  After 
the  Civil  War  the  collection  of  the  tax  was  suspended  by  Congress,  and 
the  amounts  collected  were  subsequently  refunded  to  the  States.  For 
the  enforcement  of  a  direct  tax  by  sales  of  delinquent  lands,  see  Turner 
V.  Smith,  14  Wallace,  553;  Keely  v.  Sanders,  99  U.  S.  441;  Van  Brocklin 
V.  Tennessee,  117  U.  S.  151. 

2  3  Dallas  171,  decided  in  1796. 

3  Springer  V.  United  States,  102  U.  S.  586. 


§  487        THE  TAXING  POWER  OF  CONGRESS.  649 

the  invalidity  of  the    provision    as    to    the    income  from 
rentals  would  invalidate  the  act.^ 

Upon  the  rehearing,  the  tax  on  income,  not  only  from 
real  estate,  but  also  from  personal  property,  was  adjudged 
a  direct  tax,  and  the  whole  act,  since  it  was  one  entire 
scheme  of  taxation,  was  therefore  declared  void.^ 

§  487.  Inheritance  tax  not  direct  tax. 

The  meaning  of  the  term  direct  taxes  was  again  thor- 
oughly argued  and  considered  by  the  court  in  the  case  of 
the  inheritance  tax  enacted  in  the  Spanish  War  Eevenue 
Act  of  1898.^  The  inheritance  or  succession  tax  enacted 
durins:  the  Civil  War  had  been  held  to  be  an  excise  tax  *  and 
therefore  not  a  direct  tax.  But,  as  it  had  also  been  held 
under  the  same  revenue  act  that  an  income  tax  was  an 
excise  tax  and  not  a  direct  tax,  it.  was  argued  that  this 
decision  had  been  overruled  by  the  decision  upon  the  In- 
come Tax  of  1894.  The  court  held  however  that  the  case 
of  Scholey  v.  Rew  had  not  been  overruled,  but  had  been 
distinguished  on  the  ground  that  the  income  tax  was  not 
involved  in  the  case.  "Undoubtedly,"  the  court  said, 
"  in  the  course  of  the  opinion  in  the  Pollock  case,  it  was 
said  that,  if  a  tax  was  direct  within  the  constitutional  sense, 
the  mere  erroneous  qualification  of  it  as  an  excise  or  duty 

1  Pollock  V.  Farmers'  Loan  &  Trust  Co.,  157  U.  S.  429,  J-ustices  White 
and  Harlan  dissenting  and  Justice  Jackson  absent.  The  justices  all 
agreed  in  holding  that  the  tax  on  income  from  bonds  of  municipal  cor- 
porations was  invalid  as  a  tax  upon  the  agencies  of  the  State.  The 
justices  were  also  equally  divided  upon  the  question  whether  any  part  of 
the  income  tax,  if  not  considered  as  a  dirtct  tax,  was  invalid  for  want 
of  uniformity  on  either  of  the  grounds  suggested.  Upon  the  rehearing 
however  this  question  of  uniformity  was  not  decided  or  considered,  the 
other  questions  decided  being  decisive  of  the  case.  As  to  uniformity  in 
Federal  taxation,  see  infra,  §  491. 

2  158  U.  S.  GOl,  Justices  Harlan,  Brown,  Jackson  and  White  dissenting. 

3  Knowlton  v.  Moore,  178  U.  S.  41. 
^  Scholey  v.  Rew,  23  Wallace  331. 


650  THE  TAXING  POWER  OF  CONGRESS.  §   488 

would  not  take  it  out  of  the  constitutional  requirement  as 
to  apportionment.  But  this  language  related  to  the  sub- 
ject-matter under  consideration,  and  was  but  a  statement 
that  a  tax  which  was  in  itself  direct,  because  imposed  upon 
property  solely  by  reason  of  its  ownership,  could  not  be 
chano-ed  by  affixing  to  it  the  qualification  of  excise  or 
duty."  The  inheritance  tax  was  therefore  sustained  as 
an  excise  tax  and  the  decision  in  Scholey  v.  Eew  was 
reaffirmed. 

§  488.  Direct  taxation  in  economic  sense  and   constitu- 
tional sense  distinguislied. 

It  was  strongly  urged  in  Knowlton  v.  Moore  that  the 
ability  to  "shift  the  tax"  was  the  basis  of  distinction 
adopted  by  the  economists  between  an  indirect  and  a  direct 
tax ;  that  is,  if  the  party  upon  whom  by  law  the  burden  of 
paying  the  tax  was  first  cast  could  thereafter  shift  it  to 
another  person,  the  tax  would  be  indirect,  while  if  he 
could  not  shift  it,  the  tax  would  be  direct  in  the  economic 
and  in  the  constitutional  sense.  The  court  replied  how- 
ever that,  although  this  theory  of  the  economists  had  been 
referred  to  in  the  Income  Tax  Cases,  it  was  not  the  basis  of 
the  conclusion  of  the  court.  The  constitutional  meaning 
of  the  word  "  direct  "  was  the  matter  decided.  As  to.  this 
economic  distinction,  the  court  reiterated,  page  83,  what 
had  been  said  in  Nicol  v.  Ames  :i  — 

' '  In  deciding  upon  the  validity  of  a  tax  with  reference 
to  these  requirements,  no  microscopic  examination  as  to 
the  purely  economic  or  theoretical  nature  of  the  tax  should 
be  indulged  in  for  the  purpose  of  placing  it  in  a  category, 
which  would  invalidate  the  tax.  As  a  mere  abstract, 
scientific  or  economical  problem,  a  particular  tax  might 
possibly  be  regarded  as  a  direct  tax,  when  as  a  practical 

1  173  U.  S.  509,  515. 


§   489  THE  TAXIXG  POWER  OF  CONGRESS.  651 

matter  pertaining  to  the  actual  operation  of  the  tax  it 
might  quite  plainly  appear  to  be  indirect.  Under  such  cir- 
cumstances, and  while  varying  and  disputable  theories 
might  be  indulged  as  to  the  real  nature  of  the  tax,  a  court 
would  not  be  justified,  for  the  purpose  of  invalidating  the 
tax,  in  placing  it  in  a  class  different  from  that  to  which  its 
practical  results  would  consign  it.  Taxation  is  eminently 
practical,  and  is,  in  fact,  brought  to  every  man's  door,  and 
for  the  purpose  of  deciding  upon  its  validity  a  tax  should 
be  regarded  in  its  actual,  practical  results,  rather  than  with 
reference  to  those  theoretical  or  abstract  ideas  whose  cor- 
rectness is  the  subject  of  dispute  and  contradiction  among 
those  who  are  experts  in  the  science  of  political  economy." 

§  489.  Direct  tax  defined  l>y  Supreme  Court  in  Knowlton 
V.  Moore. 

In  the  same  case  (Knowlton  v.  Moore)  the  effect  of  the 
decision  in  the  Income  Tax  Cases  was  thus  stated  by  the 
court,  all  of  the  judges  concurring  in  this  part  of  the 
opinion,  page  82  :  — 

' '  Considering  that  the  constitutional  rule  of  apportion- 
ment had  its  origin  in  the  purpose  to  prevent  taxes  on 
persons  solely  because  of  their  general  ownership  of  prop- 
erty from  being  levied  by  any  other  rule  than  that  of 
apportionment,  two  things  were  decided  by  the  court; 
First,  that  no  sound  distinction  existed  between  a  tax 
levied  on  a  person  solely  because  of  his  general  ownership 
of  real  property,  and  the  same  tax  imposed  solely  because 
of  his  general  ownership  of  personal  property.  Secondly, 
that  the  tax  on  the  income  derived  from  such  property, 
real  or  personal,  was  the  legal  equivalent  of  a  direct  tax  on 
the  property  from  which  said  income  was  derived,  and 
hence  must  be  apportioned." 

It  therefore  follows  that  capitation  or  poll  taxes,  taxes 
upon  real  or  personal  property  "solely  because  of  the  gen- 


652  THE  TAXING  POWER  OF  CONGRESS.  §   490 

eral  ownership  of  such  property,"  whether  owned  by 
individuals  or  corporations,  and  taxes  upon  the  income 
from  such  real  or  personal  property,  are  direct  taxes  within 
the  meaning  of  the  Constitution  and  must  be  levied  ac- 
cording to  the  rule  of  apportionment  among  the  States 
according  to  population.  Taxes  upon  all  other  subjects  of 
taxation,  including  those  upon  incomes  not  from  real  or 
personal  property,  that  is,  incomes  from  services,  pro- 
fessions, etc.,  taxes  upon  inheritances,  hcense  taxes  upon 
occupations,  and  excise  taxes  upon  commodities,  are  in- 
cluded in  the  words  "  duties,  imposts  and  excises  "  and  may 
be  levied  by  Congress  in  its  discretion  without  regard  to 
the  rule  of  apportionment.^ 

§  490.  Taxing  power  of  Congress  co-extenslve  witli  terri- 
tory of  United  States. 

The  power  of  Congress  in  levying  and  collecting  taxes, 
duties,  imposts  and  excises,  under  section  8  of  Article  I 
of  the  Constitution,  is  co-extensive  with  the  territory  of 
the  United  States  and  includes  the  District  of  Columbia. 
This  was  adjudged  in  an  early  case,^  wherein  it  was  con- 
tended that  Congress  could  not  impose  a  direct  tax  on  the 
District  of  Columbia  by  the  rule  of  apportionment  for  na- 
tional purposes.  The  court,  in  an  opinion  by  Chief  Justice 
Marshall,    declared   that   the    right  of  Congress  to  tax  the 


1  The  tax  upon  sugar  refineries  measured  by  gross  receipts  was  held 
by  the  United  States  Circuit  Court  to  be,  not  a  direct  tax,  but  an  excise 
laid  upon  business.  Spreckels  Sugar  Refining  Co.  v.  McClain,  109  Fed. 
Rep.  (Pa.)  76. 

2  Loughborough  v.  Blake,  5  Wheaton  317.  Justice  Brown  in  his  opin- 
ion in  Downes  v.  Bidwell,  infra,  §  ido,  says  as  to  this  quotation  from  the 
opinion,  ''so  far  as  applicable  to  the  District  of  Columbia,  these  observ- 
ations are  entirely  sound.  So  far  as  they  apply  to  the  territories,  they 
were  not  called  forby  the  exigencies  of  the  case."  182  U.  S.,p.  262.  But 
contra,  see  the  concurring  opinion  of  Justice  White  in  the  same  case,  p. 
292,  and  the  dissenting  opinion  of  Chief  Justice  Fuller,  p.  352. 


§  490  THE  TAXING  POAYER  OF  CONGRESS.  653 

District  did  not  depend  solely  upon  the  grant  to  Congress 
in  the  Constitution  of  exclusive  legislative  power  over  the 
District.  The  granting  of  the  taxing  power  in  the  Consti- 
tution was  generally  without  limitation  as  to  place.  It 
consequently  extends  to  all  places  over  which  the  govern- 
ment extends.  If  this  could  be  doubted,  the  doubt  would 
be  removed  by  the  subsequent  words  in  the  Constitution 
which  modify  the  grant,  that  all  duties,  imposts  and  excises 
shall  be  uniform  throughout  the  United  States.  The  court 
continued,  page  319  :  — 

"  Does  this  term  designate  the  whole,  or  any  particular 
portion  of  the  American  empire  ?  Certainly  this  question 
can  admit  but  one  answer.  It  is  the  name  given  to  our 
great  repubhc,  which  is  composed  of  States  and  territories. 
The  District  of  Columbia,  or  the  territory  west  of  the  Mis- 
souri, is  not  less  within  the  United  States  than  Maryland 
or  Pennsylvania;  and  it  is  not  less  necessary,  on  the  prin- 
ciples of  our  Constitution,  that  uniformity  in  the  imposition 
of  imposts,  duties,  and  excises,  should  be  observed  in  the 
one  than  in  the  other.  Since,  then,  the  power  to  lay  and 
collect  taxes,  which  includes  direct  taxes,  is  obviously  co- 
extensive with  the  power  to  lay  and  collect  duties,  imposts, 
and  excises,  and  since  the  latter  extends  throughout  the 
United  States,  it  foUows  that  the  power  to  impose  direct 
taxes  also  extends  throughout  the  United  States." 

The  argument  was  presented  that  this  would  necessitate 
extending  all  direct  taxes  to  the  District  and  territories, 
which  would  be,  not  only  inconvenient,  but  contrary 
to  the  understanding  and  practice  of  the  government. 
The  court  replied  that,  while  Congress  clearly  has  no  power 
to  exempt  any  State  from  its  due  share  of  the  burden,  as 
the  second  section  of  the  first  article  of  the  Constitution 
requires  that  direct  taxation  shall  be  extended  to  all  the 
States  upon  the  principle  of  apportionment,  there  is  no 
necessity  created  for  extending  a  direct  tax  to  the  District 


654  THE  TAXING  POWER  OF  CONGRESS.        §  491 

or  territories,  because  the  ninth  section  of  the  same  article 
does  not  require  such  extension.  The  general  grant  of 
power  to  lay  and  collect  taxes,  on  the  other  hand,  was 
made  in  terms  which  comprehended  the  District  and  terri- 
tories as  well  as  the  States.  The  Constitution  may  there- 
fore be  understood  to  give  a  rule  when  the  territories  shall 
be  taxed,  without  imposing  the  necessity  of  taxing  them. 

§  491.  Uniformity  in  Federal  taxation. 

The  Constitution  provides  that  all  duties,  imposts  and 
excises  shall  be  uniform  throughout  the  United  States. 
The  uniformity  thus  required  is  geographical  only,  that  is, 
the  tax  must  operate  equally  throughout  the  United  States. 
Intrinsic  uniformity,  equality  of  operation  upon  all  persons 
similarly  situated  under  the  construction  given  to  the 
requirement  of  equality  and  uniformity  in  State  consti- 
tutions, is  not  required  in  this  limitation  upon  Federal 
taxation. 

Thus,  in  the  Head  Money  Cases, ^  the  Act  of  Congress 
regulating  immigration  and  imposing  a  duty  of  fifty  cents 
upon  every  passenger  from  foreign  ports  was  held  to  be  a 
uniform  act,  because  it  operated  with  the  same  force  and 
effect  in  every  place  where  the  subject  of  it  was  found.  It 
did  not  violate  the  requirement  of  uniformity,  nor  another 
provision  of  the  Constitution  directing  that  no  preference 
should  be  given  by  the  regulation  of  commerce  to  the  ports 
of  one  State  over  those  of  another. ^ 

This  question  of  uniformity  in  taxation  was  thoroughly 
reviewed  and  definitely  determined  by  the  Supreme  Court 
in  the  recent  cases  already  referred  to,  involving  the  con- 

1  1 L2  U.  S.  580.  It  was  in  this  case  and  in  tliis  connection  that  Justice 
Miller,  delivering  the  opinion  of  the  court,  stated  the  often  quoted 
aphorism,  "  perfect  uniformity  and  perfect  equality  in  taxation,  in  all 
the  aspects  in  which  the  human  mind  can  view  it,  is  a  baseless  dream." 

2  Article  I,  Sec.  9,  Par.  6. 


§   491  THE  TAXING  POWER  OF  CONGRESS.  655 

stitutionality  of  the  War  Revenue  Act  of  1898.^  In  the 
first  of  these  cases,  the  court  said  that  the  tax  upon  sales 
made  upon  commercial  exchanges  answered  the  requirement 
of  uniformity,  whether  that  term  was  to  be  understood  in 
its  geographical  sense  or  as  meaning  intrinsic  uniformity, 
that  is,  unif  ormit}^  as  to  all  the  taxpayers  similarly  situated 
with  regard  to  the  subject-matter  of  the  tax.  It  was  uni- 
form in  the  former  sense,  because  it  operated  wherever  such 
sales  were  made,  and  in  the  latter  or  intrinsic  sense,  be- 
cause the  classification  between  the  parties  using  such 
facilities  in  sales  and  those  not  using  them  was  natural 
and  therefore    proper   and  legal. 

But  in  the  other  case,  Knowlton  v.  Moore,  it  was  strongly 
argued  that  the  inheritance  taxation  in  question  was  lacking 
in  intrinsic  uniformity,  because  it  exempted  legacies  and 
distributive  shares  in  personal  property  below  ten  thousand 
dollars,  classified  the  rate  of  tax  according  to  the  rela- 
tionship or  absence  of  relationship  to  the  decedent  of  the 
legatee  or  distributee,  and  provided  for  a  rate  of  tax 
graded  according  to  the  amount  of  the  legacy  or  share. 
Under  the  decisions  in  some  of  the  State  courts  such  a 
tax  would  be  invalid  as  wanting  in  intrinsic  uniformity. 
But  the  court  held  in  a  learned  and  exhaustive  opinion  by 
Justice  White,  all  the  judges  concurring,  that  the  uniform- 
ity required  by  the  Constitution  in  Federal  taxation  does 
not  mean  what  the  word  "  uniform  "  means,  or  the  words 
"equal  and  uniform"  mean,  in  the  State  constitutions. 
The  former  does  not  mean  intrinsic,  but  only  geographical, 
uniformity. 

It  was  contended  in  this  case  that  the  act  was  lacking  in 
geographical  uniformity,  as  testamentary  and  intestate  laws 
may  vary  in  different  States.  The  court  replied  that  this 
was  immaterial,  as  the  same  degree  of  relationship,  or  want 

1  Nicol  V.  Ames,  supra^  §  488,  and  Knowlton  u.  Moore,  sMpm,  §  487. 


656  THE  TAXING  POWER  OF  CONGRESS.  §   402 

of  relationship,  to  the  deceased,  wherever  existing,  was  lev- 
ied on  at  the  same  rate  throughout  the  United  States.  Geo- 
oraphical  uniformity  does  not  require  that  the  objects  of  the 
tax  must  exist  with  uniformity  in  the  several  States.  Taxes 
are  uniform  in  the  constitutional  sense,  when  they  operate 
generally  throughout  the  United  States  and  uniformly  wher- 
ever the  subjects  of  the  tax  are  found.  Congress  may  select 
the  subjects  of  taxation  in  its  discretion,  and  it  is  immaterial 
whether  the  requirements  of  uniformity  and  equality,  as  un- 
derstood in  State  taxation,  are  adhered  to  or  not.  The  court 
called  attention  in  its  opinion'to  the  fact  that  the  requirement 
of  uniformity  in  section  eight  only  applies  to  duties,  imposts 
and  excises,  and  is  not  essential  in  the  levy  of  all  the  taxes 
which  the  Constitution  authorizes.  Uniformity  is  not  re- 
quired in  the  levy  of  direct  taxes,  which  are  required  to  be 
apportioned.  The  effect  of  requiring  inherent  or  intrin- 
sic uniformity  therefore  would  be  that  it  would  be  ap- 
plied only  to  those  taxes  to  which  in  the  nature  of  things 
the  principle  of  such  uniformity  is  least  applicable  and  in 
which  it  is  least  susceptible  of  being  enforced.  Thus  ex- 
cise taxes  and  import  duties,  which  are  required  to  be  uni- 
form, look  to  particular  subjects  and  take  every  conceivable 
form  which  may  by  the  legislative  authority  be  deemed  best 
for  the  general  welfare. 

§  492.  Uniformity  in  levy  of  duties. 

The  requirement  of  geographical  uniformity  therefore 
extends  to  any  form  of  taxation  not  included  in  the  term 
direct  taxes.  Thus  in  the  levy  of  duties  upon  importa- 
tions, where  specific  and  ad  valorem  duties  are  both 
employed,  the  same  form  of  duty  must  be  levied  upon  the 
same  importation  at  whatever  port  it  may  be  entered.  Mr. 
Tucker,  in  his  Constitutional  Law,  calls  attention  to  an 
interesting  illustration  of  this  enforcement  of  uniformity 


§  493  THE  TAXING  POSTER  OF  CONGRESS.  657 

in  the  duty  on  sugar, ^  where  the  use  of  different  tests  in 
the  different  ports  to  measure  the  exact  saccharine  strength 
was  held  by  the  Secretary  of  the  Treasury  to  produce  a 
difference  of  duty  in  the  ports,  destroying  the  uniformity 
estabhshed  by  the  Constitution. 

§  493.  Levjing  duties  under  war  power. 

The    uniformity    clause    of    the  Constitution   received 

thorough  and  exhaustive  discussion  in  the  recent  Insular 

Decisions   of  the  Supreme  Court,  in  cases   involving  the 

status  of  the  territory  acquired  by  the  United  States  as 

the  result  of  the  Spanish  war. 

It  was  agreed  b}^  all  of  the  judges  that  duties  upon  im- 
ports from  the  United  States  to  Porto  Eico  collected  by 
the  military  commander  and  by  the  President  as  com- 
mander in  chief,  from  the  time  possession  was  taken  of 
the  island  until  the  ratification  of  the  treaty  of  peace, 
were  legally  exacted  under  the  war  power. ^ 

The  question  of  the  collection  X)f  revenues  during  war 
had  been  considered  in  the  cases  growing  out  of  the 
"War  of  1812,  and  also  of  the  Mexican  war.  Thus 
a  town  captured  by  the  enemy  in  the  War  of  1812 
was  deemed  a  foreign  country  as  respected  our  revenue 
laws  during  the  period  of  hostile  occupation,  and  the 
goods  imported  into  that  town  during  such  occupation  did 
not  become  liable  to  pay  duty  to  the  United  States  by 
reason  of  the  resumption  by  that  nation  of  its  sovereignty.^ 
A  Mexican  port  acquired  by  the  United  States  in  the  Mex- 
ican War  and  held  by  its  military  authorities  did  not 
thereby  become  a  port  of  the  United  States,  but  remained 
a  foreign  port,  and  duties  were  properly  levied  upon  goods 

1  Tucker  on  Const.,  Sec.  218. 

2  Dooley  v.  United  States,  182  U.  S.  222. 

3  United  States  v.  Rice,  4  "Wheat.  246. 

42 


658  THE  TAXING  POWER  OF  CONGRESS.  §   494 

imported  therefrom  into  the  United  States.^  Duties  were 
also  properly  levied  in  San  Francisco,  after  it  was  taken  by 
the  United  States  during  the  Mexican  War  and  prior  to  the 
treaty  of  peace,  under  the  war  tariff  established  by  the 
government;  and,  thereafter,  duties  levied  by  order  of  the 
government  in  accordance  with  the  Act  of  Congress  were 
held  properly  levied,  until  the  revenue  laws  of  the  United 
States  were  put  into  practical  operation  in  California.^ 

§  494.  Uniformity  clause  as  applied  to  territorial  acqui- 
sitions. 

The  treaty  of  peace  with  Spain,  whereunder  Porto  Rico 
and  the  Philippine  Islands  were  ceded  to  the  United  States, 
was  ratified  on  February  6,  1999,  but  the  official  proclama- 
tion of  the  President  was  not  issued  until  April  11,  1899. 
On  the  following  day,  Congress  enacted  a  law  known  as 
the Foraker  Act, ^declared  in  its  title  to  be  intended  "  tem- 
porarily to  provide  a  revenue  and  civil  government  for 
Porto  Rico,"  which  established  special  tariff  rates  on  mer- 
chandise going  into  Porto  Rico  from  the  United  States  or 
coming  into  the  United  States  from  Porto  Rico,  and  pro- 
vided further  that  these  duties  should  be  held  as  a  separate 
fund  for  the  benefit  of  the  island  and  transferred  to  its 
local  treasury. 

Thus,  before  the  treaty  of  peace,  duties  on  goods  from 
the  United  States  into  Porto  Rico  were  collected  b}^  the 
military  commander  and  by  the  President  as  commander 
in  chief,  and,  as  stated  above,  it  was  held  that  such 
duties  were  legally  exacted  under  the  war  power.  After 
the  ratification  of  the  treaty  of  peace  and  until  the  passage 
of  the  Foraker  Act  as  above  stated,  the  rates  of  duty  estab- 
lished by  the  tariff  laws  of  the  United  States  were  collected, 

1  Fleming  v.  Page,  9  Howard  603. 

2  Cross  V.  Harrison,  16  Howard  164. 

3  31  Stat.  77,  c.  191. 


§  495        THE  TAXING  PO^^'ER  OF  CONGRESS.  659 

both  in  the  ports  of  the  United  States  and  in  Porto  Rico. 
The  court  held,i  that,  with  the  ratification  of  peace  between 
the  United  States  and  Spain,  th«  island  of  Porto  Rico 
ceased  to  be  a  foreign  country,  within  the  meaning  of  the 
tariff  laws,  and  that  the  right  to  exact  duties  upon  import- 
ations from  Porto  Rico  to  New  York,  and  upon  those  from 
New  York  to  Porto  Rico  ceased  at  the  same  time. 2 

But  this  decision  only  apphed  to  the  status  prior  to  the 
enactment  of  the  Foraker  Act,  and  on  the  question  of  the 
validity  of  this  act,  presented  in  the  case  of  Bidwell  v. 
Downes,^  five  of  the  judges  concurred  in  holding  the  act 
valid,  but  they  did  not  concur  in  the  grounds  of  their 
decision,  so  that  there  is  no  opinion  of  the  court  as  such.* 

§  495.  Insular  Decisions. 

Justice  Brown,  who  announced  the  decision  of  the  court, 
in  Bidwell  v.  Downes,  although  none  of  the  other  justices 
concurred  in  the  reasoning  of  his  opinion,  maintained  that 
the  island  of  Porto  Rico  is  not  a  part  of  the  United  States 
within  the  meaning  of  the  uniformity  clause  of  the  Consti- 
tution ;  that  the  revenue  clause  of  the  Constitution  applies 
to  the  States  of  the  Union  and  not  to  the  Territories ;  and 
that  the  practical  interpretation  put  by  Congress  upon  the 
Constitution  had  been  continuous  and  uniform  to  the  effect 
that  the  Constitution  is  applicable  to  territories    acquired 

1  De  Lima  v.  Bidwell,  182  U.  S.  1;  Justices  McKenna,  Shiras,  White 
and  Gray  dissenting. 

2  Dooley  v.  United  States,  182  U.  S.  222.  Justices  McKenna,  Shiras, 
"White  and  Gray  dissented,  holding  that  the  duties  collected  both  prior 
and  subsequent  to  the  treaty  of  peace  were  lawfully  imposed. 

3  182  U.  S.  244. 

*  Hon.  Charles  E.  Littlefleld,  in  an  interesting  paper  upon  the  Insular 
Cases,  read  before  the  American  Bar  Association  of  1901,  page 242,  says: 
•'  The  Insular  Cases,  and  the  manner  in  which  the  results  were  reached, 
the  incongruity  of  the  results  and  the  variety  of  inconsistent  views 
expressed  by  the  different  members  of  the  court,  are,  I  believe,  without 
a  parallel  in  our  judicial  history." 


660  THE  TAXING  POWER  OF  CONGRESS.  §  495 

by  conquest,  only  when  and  so  far  as  Congress  shall  so  di- 
rect.    It  followed  therefore  that  the  island  of  Porto  Kico 
was  a  territory  appurtenant  and  belonging  to  the  United 
States,  but  not  a  part  of  the  United  States  within  the  rev- 
enue clause  of  the  Constitution.     In  the  opinion  however, 
he  disclaimed  any  intention  of  holding  that  the  inhabitants 
of  the  Territories  are  subject  to  the  unrestrained  power  of 
Congress,  and  suggested  that  there  is  a  clear  distinction  be- 
tween such  prohibitions  of  the  Constitution  as  go  to  the 
very  root  of  the  power  of  Congress  to  act  at  all,  irrespect- 
ive of  time  or  place,  and  such  as  are  operative  only   and 
throughout  the  United  States  and  among  the  several  States. 
Justices  White,  McKenna  and  Shiras,  concurring  in  the 
decision,  maintained  that  Porto  Eico   occupied  a   position 
between  that  of  a  territory  absolute  and  that  of  a  domestic 
territory  absolute ;  that  Congress,  in  governing  the  Terri- 
tories, is  subject  to  the  limitations  of  the  Constitution,  and 
that  every  provision  of  the  Constitution  which  is  applicable 
to  the  Territories  is  controlling  therein.     But  territory  ac- 
quired by  the  treaty-making  power  does  not  become  "  incor- 
porated ' '  in  the  United  States  without  the  concurring  action 
of  the  legislative   department  of  the  government.     Porto 
Kico  therefore,  in  the  international  sense,  was  not  a  foreign 
country,  since  it  was  subject  to  the  sovereignty  of,  and  was 
owned  by,  the  United  States;    but  it  was   foreign   to  the 
United  States  in  the  domestic  sense,  because  the  island  had 
not  been  incorporated   into   the   United    States,   but   was 
merely  "  appurtenant  thereto  "  as  a  possession. 

Justice  Gray,  in  a  separate  concurring  opinion,  said  that 
of  necessity  there  is  a  "  transition  period  "  in  the  incorpo- 
ration of  acquired  territory,  and  that  a  system  of  duties 
during  that  period  may  be  established  temporarily  by  Con- 
gress, within  the  scope  of  its  authority  under  the  Consti- 
tution of  the  United  States. 

On   the  other   hand,  four  judges.  Chief  Justice  Fuller, 


§  496  THE  TAXING  POWER  OF  CONGRESS.  661 

and  Justices  Harlan,  Brewer  and  Peckham,  dissented  in 
toto,  holding  that  there  is  no  constitutional  basis  for  the 
theory  of  "incorporation,"  that  all  territory  ceded  to  the 
United  States  becomes  thereby  an  integral  part  of  the 
Union  and  entitled  to  the  protection  of  the  Constitution, 
incli^ding  the  uniformity  clause  in  regard  to  taxation. ^ 

The  same  principle  was  applied  in  a  case  decided  at  the 
following  term  involving  fourteen  diamond  rings  brought 
to  San  Francisco  by  a  soldier  returning  from  the  Philip- 
pines.^  These  goods  were  brought  to  the  United  States, 
subsequent  to  the  ratification  of  the  treaty  of  peace,  and 
before  the  act  establishing  a  rate  of  duty  between  the  United 
States  and  the  Philippines.  The  court  followed  its  opinion 
in  the  case  of  DeLima  v,  Bidwell,  supra,  and  held  that  the 
duties  were  illegally  exacted,  Justice  Brown  concurring  in 
a  separate  opinion,  and  Justices  Gray,  Shiras,  White  and 
McKenna  dissenting,  so  that  the  same  di\asion  in  the  court 
continued. 

§  496.  Tax  upon  exports. 

The  taxing  power  of  Congress  is  expressly  limited  by 
the  prohibition  ^  that  no  tax  or  duty  shall  be  laid  on  arti- 
cles exported  from  any  State.     This  is  reinforced  by  the 

1  The  Reporter  appends  a  foot-note  with  the  syllabi  in  this  case,  182 
U.  S.  244,  as  follows:  ''  In  announcing  the  conclusion  and  judgment  of 
the  court  in  this  case,  Mr.  Justice  Brown  delivered  an  opinion.  Mr. 
Justice  White  delivered  a  concurring  opinion  which  was  also  concurred 
in  by  Mr.  Justice  Shiras  and  Mr.  Justice  McKenna.  Mr.  Justice  Gray 
also  delivered  a  concurring  opinion.  The  Chief  Justice,  Mr.  Justice 
Harlan,  Mr.  Justice  Brewer  and  Mr.  Justice  Peckhara  dissented.  Thus 
it  is  seen  that  there  is  no  opinion  in  which  a  majority  of  the  court  con  - 
curred.  Under  these  circumstances  I  havej  after  consultation  with  Mr, 
Justice  Brown,  who  announced  the  judgment,  made  head-notes  of  each 
of  the  sustaining  opinions,  and  placed  before  each  the  names  of  the 
justices  or  justice  who  concurred  in  it." 

2  Fourteen  Diamond  liings  v.  United  States,  183  U.S.  177. 

3  Constitution,  Art.  I,  Sec.  9,  Par.  5, 


662  THE  TAXING  POWER  OF  CONGRESS.  §   496 

following  provision:  '*  No  preference  shall  be  given  by 
any  regulation  of  commerce  or  revenue  to  the  ports  of  one 
State  over  those  of  another;  nor  shall  vessels  bound  to, 
or  from,  one  State,  be  obliged  to  enter,  clear,  or  pay  duties, 
in  another."  The  Constitution  also  prohibits i  the  States 
from  levying  any  imposts  or  duties  on  imports  or  exports 
without  the  consent  of  Congress. 2  The  term  "imports 
and  exjoorts  "  in  both  of  these  clauses,  limiting  the  taxing 
power  of  the  States  and  national  government,  relates 
solely  to  foreign  commerce.^  It  will  be  observed  that  the 
term  ' '  tax  ' '  in  the  first  of  these  prohibitions  appears  as 
the  alternative  of  "duty."  It  has  been  suggested  that 
this  language  was  probably  intended  to  cover  the  case  of  a 
tax  on  an  article  which  is  in  transilu  to  be  exported,  and 
the  case  of  a  duty  upon  the  article  when  it  becomes  the 
subject  of  export. 

The  exemption  only  applies  to  property  actually  ex- 
ported or  in  transitu  to  be  exported,  and  the  intent 
to  export  property  is  not  sufiicient.  This  question  was 
raised  in  the  Supreme  Court  in  regard  to  the  cotton  tax 
levied  during  the  Civil  War.  Its  collection  was  resisted 
on  the  ground  that  it  was  necessarily  a  tax  upon  exports, 
as  four-fifths  of  all  the  cotton  raised  in  the  country  was 
in  fact  exported.  Justice  Miller  in  his  lectures*  says  that 
the  Supreme  Court  was  equally  divided  upon  this  question, 
and  it  was  not  decided.  It  was  subsequently  held  in  other 
cases  that  the  objection  was  not  valid,  and  that  the  only 
property  exempted  from  taxation  under  these  provisions  is 
that  actually  in  process  of  exportation,  which  has  begun 
its  voyage  or  its  preparation  for  the  voyage.^ 

1  Article  I,  Sec.  10,  Par.  2. 

2  See  supra,  Chapter  III. 

3  See  supra,  Chapter  III. 

4  Miller's  Lectures,  pp.  252  and  592. 

5  Coe  V.  Errol,  116  U.  S.  517;  Turpin  v.  Burgess,  117  U.  S.  504. 


§  497  THE  TAXING  POWER  OF  CONGRESS.  663 

The  exportation  stamp  required  to  be  aifixed  to  every 
package  of  tobacco  intended  for  exportation  before  its 
removal  from  tlie  factory  was  held  constitutional,!  the 
court  saying  that  the  stamp  required  was  a  means  devised 
for  th^  prevention  of  fraud  b}^  separating  and  identifying 
the  tobacco  intended  for  exportation.  The  excise  tax  laid 
on  tobacco  before  its  removal  from  the  factory  is  not  a 
duty  on  exports  within  the  prohibition  of  the  Constitution, 
even  though  the  tobacco  be  intended  for  exportation. 2 
In  the  case  last  cited  the  court  cited  the  decision  in  Coe  v. 
Errol,  Avhere  property  intended  for  removal  to  another 
State  was  held  taxable,  the  court  sajdng  that  the  consti- 
tutional prohibition  against  taxing  exports  is  substantially 
the  same  when  directed  to  the  United  States  as  when 
directed  to  a  State. 

§  497.  Tax  on  foreign  bills  of  lading  is  tax  on  exports. 

The  War  Eevenue  Act  of  1898,  which  has  contributed 
so  materially  to  the  judicial  discussion  of  the  congressional 
taxing  power,  included  a  stamp  tax  on  foreign  bills  of 
lading,  and  this  was  adjudged  by  the  court,  in  an  exhaust- 
ive opinion  by  Justice  Brewer, ^  to  be  in  substance  and 
effect  equivalent  to  a  tax  upon  articles  included  in  that 
l)ill  of  lading,  and  therefore  a  tax  or  dutv^  upon  exports, 
in  conflict  with  the  Constitution.  It  was  strongly  urged 
in  this  case  that  similar  stamp  duties  had  been  enforced  at 
different  periods,  since  the  foundation  of  the  government, 
and  never  before  been  challenged.  But  the  court  replied 
that  the  practical  construction  of  a  statute,  by  those  having 
actual  charge  of  its  execution,  is  to  be  relied  upon  only  in 
cases  of  doubt;  and  that,  when  the  meaning  and  scope  of 
a  constitutional  provision  are  clear,  it  cannot  be  overthrown 

1  Pace  V.  Burgess,  92  U.  S.  372. 

2  Turpin  v.  Burgess,  117  U.  S.  504. 

3  Fairbank  v.  United  States,  181  U.  S.  283. 


664  THE  TAXING  POWER  OF  CONGRESS.  §   497 

by  legislative  action,  although  several  times  repeated  and 
never  before  challenged.     The  court  added  at  page  311 : — 

*'  It  will  be  perceived  that  these  stamp  duties  have  been 
in  force  during  only  three  periods :  First,  from  1797  to 
1802;  second,  from  1862  to  1872;  and,  third,  commenc- 
ino-  with  the  recent  statute  of  1898.  It  must  be  borne  in 
mind  also  in  respect  to  this  matter  that  during  the  first 
period  exports  were  limited,  and  the  amount  of  the  stamp 
duty  was  small,  and  that  during  the  second  period  we  were 
jDassing  through  the  stress  of  a  great  civil  war  or  endeav- 
oring to  carry  its  enormous  debt ;  so  that  it  is  not  strange 
that  the  legislative  action  in  this  respect  passed  unchal- 
leno-ed.  Indeed,  it  is  only  of  late  vears,  when  the  burdens 
of  taxation  are  increasing  by  reason  of  the  great  expenses 
of  government,  that  the  objects  and  modes  of  taxation 
have  become  a  matter  of  special  scrutiny.  But  the  delay 
in  presenting  these  questions  is  no  excuse  for  not  giving 
them  full  consideration  and  determining  them  in  accordance 
with  the  true  meaning  of  the  Constitution." 

It  was  urged  by  counsel  that  the  same  reasoning  would 
invalidate  the  tonnage  tax  and  stamp  duties  on  manifests. 
The  court  said  that,  without  deciding  the  question  as  to 
those  taxes,  there  might  be  a  valid  difference  as  indicated 
by  the  decisions  of  the  court  with  respect  to  interstate 
commerce.  Thus  a  State  cannot  bj-  a  license  or  otherwise 
impose  a  burden  on  the  business  of  interstate  commerce, 
but  it  can  tax  the  vehicles  and  property  emploj^ed  in  that 
business,  so  long  and  so  far  as  they  are  property  in  the 
State.  The  court  added :  *'  This  difference  may  have  sig- 
nificance in  respect  to  these  other  taxes.  As  heretofore 
said,  we  do  not  decide  the  question,  but  only  make  these 
suggestions  to  indicate  that  the  matter  has  been  con- 
sidered."! 

1  Justices  Harlan^  Gray,  White  and  McKenna  dissented,  saying  that  a 
stamp  duty  has  had  for  centuries  a  well  defined  meaning,  and  tbat^  In 


§  498  THE  TAXING  POWER  OF  COXGRESS.  665 

§  498.  Porto  Rican  Tariff  of  1900  not  tax  on  exports. 

An  interesting  case  in  the  "  Series  of  Insular  Decisions  " 
involved  a  consideration  of  the  clause  prohibiting  a  duty  on 
exports,  with  reference  to  the  duties  levied  under  the  Fo- 
raker  Act  of  1900  on  goods  shipped  from  New  York  to  Porto 
Rico.  It  was  strongly  contended  that,  if  Porto  Eico  is  a 
"foreign  country,"  these  duties  were  clearly  duties  upon 
exports,  and,  on  the  other  hand,  if  it  is  a  domestic  country 
and  part  of  the  United  States,  the  duties  were  illegally  ex- 
acted, because  the  act  was  an  interference  with  the  internal 
commerce  of  the  country  and  a  preference  of  one  port 
thereof  over  another,  in  violation  of  the  Constitution. ^  The 
court  denied  this  contention  by  the  same  division  as  in  the 
other  Insular  Cases. ^  Justice  Brown,  in  his  opinion,  held 
that  Porto  Rico  was  not  a  foreign  country  within  the  mean- 
ing of  the  tariff  act.  Tlie  fact  that  the  duties  were  not  paid 
into  the  treasury  of  the  United  States,  but  held  as  a  sepa- 
rate fund  to  be  used  for  the  purposes  and  benefit  of  Porto 
Rico,  subject  to  repeal  by  the  legislative  assembly  of  that 
island,  showed  that  the  tax  was  not  intended  as  a  duty  upon 
exports.  But  he  added  that  he  did  not  intend,  by  his  opin- 
ion, to  intimate  that  Congress  could  lay  a  tax  upon  the  mer- 
chandise carried  from  one  State  into  another. 

Chief  Justice  Fuller,  and  Justices  Harlan,  Brewer  and 
Peckham  dissented,  saying,  page  175:  — 

view  of  the  frequent  legislation  by  Congress  and  its  enforcement  for 
nearly  a  centurj,  the  question  must  have  arisen  if  it  had  been  supposed 
by  any  one  that  such  legislation  infringes  the  constitutional  rights  of  the 
citizen. 

1  Art.  I,  sec.  9,  par.  5:  "No  preference  shall  be  given  by  any  regula- 
tion of  commerce  or  revenue  to  the  ports  of  one  State  over  those  of  an- 
other." 

2  Dooley  v.  United  States,  183  U.  S.  151.  There  is  an  interesting  crit- 
ical review  of  the  decisions  in  this  case,  and  also  of  Woodruff  v.  Parham, 
supra,  §  110,  in  a  paper  by  Edward  B.  Whitney  of  New  York,  es-Ass't 
Attorney- General  of  the  United  States,  on  the  Insular  Decisions  in  the 
Columbia  Law  Eevieio  of  February,  1902. 


6Q6  THE  TAXING  POWER  OF  CONGRESS.  §   499 

"  Congress  may  lay  local  taxes  in  the  territories,  affect- 
ing persons  and  property  therein,  or  authorize  territorial 
legislatures  to  do  so,  but  it  cannot  lay  tariff  duties  on  arti- 
cles exported  from  one  State  to  another,  or  from  any  State 
to  the  territories,  or  from  any  State  to  foreign  countries,  or 
grant  a  power  in  that  regard  which  it  does  not  possess. 
But  the  decision  now  made  recognizes  such  powers  in  Con- 
gress as  will  enable  it,  under  the  guise  of  taxation,  to 
exclude  the  products  of  Porto  Rico  from  the  States  as 
well  as  the  products  of  the  States  from  Porto  Eico ;  and 
this  notwithstanding  it  was  held  in  DeLima  v.  Bidwell,  182 
U.  S.  1,  that  Porto  Rico  after  the  ratification  of  the  treaty 
with  Spain  ceased  to  be  foreign  and  became  domestic 
territory." 

§  499.  Act  conferring   reciprocity  powers   on   President 
sustained. 

The  Tariff  Act  of  1890  gave  authority  to  the  President 
to  equalize  duties  on  imports,  by  suspending  the  free  intro- 
duction of  certain  commodities,  when  satisfied  that  any 
country  producing  such  articles  imposes  duties  or  other 
exactions  upon  the  agricultural  or  other  products  of  the 
United  States,  which  he  may  deem  to  be  reciprocall}^ 
unequal  or  unreasonable.  All  of  the  judges  concurring 
held  that,  even  if  this  reciprocal  provision  was  invalid,  it 
would  not  invalidate  the  other  provisions  of  the  act.^  But 
it  was  held  also,  Chief  Justice  Fuller  and  Justice  Lamar 
dissenting,  that  the  provision  was  not  open  to  the  objection 
that  it  delegated  legislative  power  to  the  President;  that 
weight  should  be  given  to  the  fact  that  such  powers  had 
been  given  to  tlie  President  with  reference  to  trade  and 
commerce  since  the  foundation  of  the  government;  and 
that   no    discretion   was    allowed  to  the  President,  but  it 

1  Field  V.  Clark,  143  U.  S.  649. 


§   500  THE  TAXING  POWER  OF  CONGRESS.  667 

was  made  his  duty  to  act  when  he  ascertained  the  facts. 
The  court  said,  at  page  693  :  — 

"He  had  no  discretion  in  the  premises  except  in  respect 
to  the^i duration  of  the  suspension  so  ordered.  But  that 
related  only  to  the  enforcement  of  the  policy  established 
by  Congress.  As  the  suspension  was  absolutely  required, 
when  the  President  ascertained  the  existence  of  a  particular 
fact,  it  cannot  be  said  that  in  ascertaining  that  fact  and  in 
issuing  his  proclamation,  in  obedience  to  the  legislative 
will,  he  exercised  the  function  of  making  laws.  Legis- 
lative power  was  exercised  Avhen  Congress  declared  that  the 
suspension  should  take  effect  upon  a  named  contingency. 
"What  the  President  was  required  to  do  was  simply  in 
execution  of  the  Act  of  Congress.  It  was  not  the  making 
of  law.  He  was  the  mere  agent  of  the  law-making  depart- 
ment to  ascertain  and  declare  the  event  upon  which  its 
expressed  will  was  to  take  effect.  It  was  a  part  of  the  law 
itself  as  it  left  the  hands  of  Congress  that  the  provisions, 
full  and  complete  in  themselves,  permitting  the  free  intro- 
duction of  sugars,  molasses,  coffee,  tea  and  hides,  from 
particular  countries,  should  be  suspended,  in  a  given  con- 
tingency, and  that  in  case  of  such  suspensions  certain 
duties  should  be  imposed."  ^ 

§  500.  Taxing  power  of  Congress  with  reference  to  treaty 
power. 

It  is  no  objection  to  the  validity  of  any  tax  imposed  by 
Act  of  Congress,  that  it  violates  provisions  contained  in 
the  treaties  of  the  government  with  other  nations.  This 
was  determined  by  the  court  in  the  Head  Money  Cases, ^ 
and  the  same  principle  has  been  since  declared.  "While  a 
treaty  is  a  law  of  the  land,  it  has  no  superiority  over  an 
Act  of  Congress,  and  may  therefore  be  repealed  or  modified 

1  112  U.  S.  580. 


668  THE  TAXING  POWER  OF  CONGRESS.  §   501 

by  an  act  of  a  later  date.  It  was  said  by  the  court,  in  the 
case  cited,  that  there  is  nothing  in  its  essential  character  or 
in  the  branches  of  the  government  by  which  a  treaty  is 
made,  to  give  it  any  superior  sanctity.  The  general 
principle  was  laid  down,  that  so  far  as  a  treaty  made  by 
the  United  States  with  a  foreign  nation  can  become  the 
subject  of  judicial  cognizance  in  the  courts  of  this  country, 
it  is  subject  to  such  enactments  as  Congress  may  pass  for 
its  enforcement, modification  or  repeal.^  This  principle  is, 
of  course,  applicable  in  the  case  of  customs  duties.  The 
validity  of  the  duty,  as  enacted  by  Congress,  cannot  be 
affected  by  the  provisions  of  any  prior  treaty,  so  far  as 
the  courts  are  concerned. 

§  501.  State  instrumentalities  and  agencies  exempt  from 
Federal  taxation. 

In  the  language  of  the  Supreme  Court  in  the  Income 
Tax  case:  2  "As  the  States  cannot  tax  the  powers,  the 
operations,  or  the  property  of  the  United  States,  nor  the 
means  which  they  employ  to  carry  their  powers  into  exe- 
cution, so  it  has  been  held  that  the  United  States  have  no 
power  under  the  Constitution  to  tax  either  the  instrumen- 
talities or  the  property  of  a  State."  It  was  the  unanimous 
opinion  of  the  justices  in  this  case,  and  this  was  the  only 
point  on  which  there  was  a  unanimous  concurrence,  that 
so  much  of  the  income  tax  law  of  1894  as  imposed  a  tax 
upon  the  income  derived  from  the  interest  of  bonds  issued 
by  a  municipal  corporation  was  a  tax  upon  the  power  of 
the  State  in  its  instrumentalities  to  borrow  money,  and 
was  consequently  repugnant  to  the  Constitution  of  the 
United    States.     "The    Constitution,"    the    court    said, 

1  As  to  the  general  principle  involved,  see  Chinese  Exclusion  Case, 
130  U.  S.  581 ;  Fong  Yue  Ting  v.  United  States,  149  U.  S.  721;  Whitney 
V.  Robinson,  124  U.  S.  190. 

2  157  U.  S.  584. 


§  501        THE  TAXING  POWER  OF  CONGRESS.  669 

«*  contemplates  the  independent  exercise  by  the  nation  and 
the  States  severally  of  their  constitutional  powers." 

It  had  been  before  decided  ^  with  reference  to  the  Income 
Tax  La*w  of  1864,  that  it  was  not  competent  for  Congress 
to  impose  a  tax  upon  the  salary  of  a  State  judicial  officer. 
The  court  ruled  there  that  the  case  was  controlled  by  the 
same  principle  as  that  of  Dobbins  v.  Erie  County,^  decid- 
ino-  that  a  State  cannot  tax  the  salaries  of  officers  of  the 
United  States;  for,  in  respect  to  its  reserved  powers,  the 
State  is  a  sovereign  as  independent  as  the  general  govern- 
ment.    It  said,  at  page  127  :  — 

"  It  is  admitted  that  there  is  no  express  provision  in  the 
Constitution  that  prohibits  the  general  government  from 
taxing  the  means  and  instrumentalities  of  the  States,  nor 
is  there  any  prohibiting  the  States  from  taxing  the  means 
and  instrumentalities  of  that  government.  In  both  cases 
the  exemption  rests  upon  necessary  implication,  and  is  up- 
held by  the  great  law  of  self-preservation ;  as  any  govern- 
ment, whose  means  employed  in  conducting  its  operations, 
if  subject  to  the  control  of  another  and  distinct  govern- 
ment, can  exist  only  at  the  mercy  of  that  government.  Of 
what  avail  are  these  means  if  another  power  may  tax  them 
at  discretion?  "  ^ 

The  Internal  Eevenue  Act  of  1864  provided  that  rail- 
roads and  certain  other  companies  should  pay  a  five  per 
cent  tax  on  the  amount  of  all  interest  paid  on  their  bonds. 
The  city  of  Baltimore  held  five  million  dollars  of  the  bonds 
of  the  Baltimore  &  Ohio  Eailroad  issued  for  a  loan  by  the 
city  to  the  railroad  of  its  own  bonds  to  that  amount.     It 

1  Collector  v.  Day,  11  Wall.  113.  See  also  United  States  v.  Railroad 
Co.,  17  Wall.  322,  and  Van  Brocklin  v.  Tennessee,  117  U.  S.  151,  178. 

2  Supra,  §  14. 

8  Justice  Bradley  dissented  in  this  case,  saying  that  the  decision  estab- 
lished a  limitation  of  the  power  of  taxation  which  he  thought  would  be 
found  very  difficult  to  control. 


670  THE  TAXING  POWER  OF  CONGRESS.  §    501 

had  already  been  decided  by  the  Supreme  Court  that  this 
was  not  a  tax  upon  the  corporations  on  their  own  account, 
but  they  were  used  as  a  convenient  means  of  collecting  the 
tax  from  the  creditor  or  stockholder  upon  whom  this  tax 
was  really  laid,^  and  it  was  therefore  held  that  this  tax 
could  not  be  collected  from  the  revenue  of  the  city,  as  it 
was  not  within  the  power  of  Congress  to  tax  the  municipal 
income  or  property.  The  court  in  this  case  made  a  distinc- 
tion between  municipal  revenues  proper  and  revenues  from 
property,  which  was  held  in  trust  by  the  cit}'"  for  charitable 
or  other  purposes,  and  said  it  was  quite  possible  that  the 
latter  would  be  subject  to  taxation,  but  that  the  railroad 
loan  was  a  proper  municipal  purpose  for  the  benefit  of  the 
city  as  well  as  the  railroad  company,  and  the  city's  interest 
therein  was  therefore  beyond  the  taxing  power  of  Congress. ^ 
This  principle  was  further  applied  by  the  United  States 
Circuit  Court  of  Appeals  of  the  Sixth  Circuit,  in  holding 
that  a  stamp,  under  the  Act  of  1898  could,  not  be  required 
on  the  bond  of  a  notary  public,  as  such  a  requirement 
would  be  in  effect  a  tax  upon  the  exercise  by  the  State  of 
its  governmental  functions,  and  it  was  unimportant  that 
the  tax  was  required  to  be  paid  before  the  officer  qualified.^ 

1  Railroad  Co.  u,  Jackson,  7  Wallace  262;  Haight  v.  Railroad  Co.,  f> 
Wallace  17. 

2  United  States  v.  Railroad  Co.,  17  Wallace  322.  Justice  Bradley  con- 
curred on  the  special  ground  that  Congress  did  not  intend  by  the  internal 
revenue  laws  to  tax  property  belonging  to  the  States  or  municipal  cor- 
porations; and  Justices  Clifford  and  Miller  dissented,  holding  that  pri- 
vate property  owned  by  a  municipal  corporation  merely  in  a  proprietary 
right  and  not  for  governmental  purposes  is  not  entitled  to  exemption. 
It  was  held  by  the  U.  S.  Circuit  Court  in  Georgia,  Georgia  v.  Atkins, 
1  Abbott  (U.  S.),  22,  that  the  word  ''  corporation  "  in  the  Revenue  Act 
of  1864,  declaring  that  every  person  or  corporation  owning  a  railroad 
should  pay  a  tax,  did  not  include  the  Western  &  Atlantic  Railroad  owned 
by  the  State  of  Georgia,  and  managed  by  the  State  agents,  and  the  profits 
from  which  were  part  of  the  revenue  of  the  State. 

3  Betman  v.  Warwick,  47  C.  C.  A.  185,  108  Fed.  Rep.  46.  It  was  held 
in  several  State  cases  that  the  requirement  that  instruments  should  not 


§   503  THE  TAXING  POWER  OF  CONGRESS.  671 

§  502.  State  securities  are  not  exempt  from  Federal  in- 
heritance taxes. 

Bu4  this  principle  of  the  exemption  of  State  agencies  and 
instrumentalities  from  Federal  taxation  does  not  extend  to 
the  exemption  of  State  and  municipal  securities  from  a 
Federal  inheritance  tax.  These  last  are  subject  to  taxation 
on  the  same  principle  that  Federal  securities  are  subject  to 
a  State  inheritance  tax.  The  tax  is  upon  the  right  of  in- 
heritance, and  not  upon  the  property  inherited.^ 

§  503.  Federal  securities  subject  to  Federal  inheritance 
taxes. 

It  was  also  held,  under  the  War  Revenue  Act  of  1898, ^ 
that,  as  a  State  inheritance  tax  may  lawfully  be  measured 
by  the  value  or  amount  of  the  legacy,  even  if  United 
States  bonds  are  included  in  the  legacy,  the  reasoning  that 
justifies  such  a  principle  must,  when  applied  to  the  case 
of  a  Federal  inheritance  tax  upon  the  same  legac}^  lead 
to  the  same  conclusion.  The  court  declined  to  consider 
the  question  whether  the  United  States,  in  the  exercise  of 
the  power  of  taxation,  can  be  estopped  by  a  contract  that 
such  power  should  not  be  exercised,  as  in  this  case  the  tax 
was  not  levied  upon  the  bonds  which  had  been  exempted 
from  taxation.  State  and  Federal,  but  upon  the  right  of 
inheritance.^ 

be  admissible  in  evidence  unless  stamped  applied  only  to  Federal  courts, 
Congress  having  no  power  to  control  evidence  in  the  State  courts. 
Garland  v.  Gaines,  73  Conn.  662;  Southern  Ins.  Co.  v.  Estes,  106  Tenn. 
472,  and  52  L.  R.  A.  915.  In  Minnesota  it  was  held,  Spoon  v.  Frambach, 
83  Minn.  301,  that  the  unstamped  paper  would  be  received  in  evidence, 
unless  the  omission  of  the  stamp  was  shown  to  be  fraudulent. 

1  Knowlton  v.  Moore,  supra. 

2  Murdock  v.  Ward,  178  U.  S.  139. 

3  The  court  said,  by  Justice  Miller,  in  Mitchell  v.  Clark,  110  U.  S. 
643:  •'  It  is  no  answer  to  this  to  say  that  it  interferes  with  the  validity 
of  contracts,  for  no  provision  of  the  Constitution  prohibits  Congress  from 
doing  this,  as  it  does  the  States,  and  where  the  question  of  the  power  of 


672  THE  TAXING  PO^VER  OF  CONGRESS.  §   505 

§  504.  Taxing  power  of  Congress  and  State  authority. 

The  relation  to  State  authority  of  the  taxing  power  of 
Congress  was  also  considered  in  the  cases  involving  the  War 
Eevenue  Act  of  1898,  supra.  It  was  claimed  that  the  in- 
heritance tax  in  that  act  was  invalid/  since  the  transmission 
of  property  by  death  was  exclusively  subject  to  the  legisla- 
tive authority  of  the  several  States.  But  the  court  said  that 
the  tax  was  imposed  upon  the  transmission  or  receipt  of  the 
inheritance  or  legacy,  and  not  upon  the  right  existing  in 
the  State  to  regulate  that  transmission  or  receipt.  It  was 
urged  that  the  power  to  tax  inheritances  involves  the  power 
to  destroy  them.  But  that  consideration,  said  the  court, 
had  no  application  to  a  lawful  tax,  because  on  that  reason- 
ing every  such  tax  would  become  unlawful,  and  therefore 
none  whatever  could  be  levied.  It  added,  page  60: 
«'  Under  our  constitutional  system  both  the  national  and 
the  State  governments  moving  in  their  respective  orbits 
have  a  common  authority  to  tax  many  and  diverse  objects. 
But  this  does  not  cause  the  exercise  of  its  lawful  attributes 
by  one  to  be  a  curtailment  of  the  powers  of  government  of 
the  other,  for  if  it  did,  there  would  practically  be  an  end 
of  the  dual  system  of  government  which  the  Constitution 
established." 

§  505.  Taxing  power  of  Congress  and  State  franchises. 

The  lawful  exercise  of  the  taxing  power  by  Congress  may 
destroy  a  business  or  franchise  exercised  under  State 
authority.  This  was  illustrated  by  the  Act  of  Congress 
imposing  a  tax  of  ten  per  cent  upon  the  notes  of  State 
banks  used  for  circulation  after  the  first  of  August,  1866. 
The  purpose,  substantially  admitted,  was  to  drive  the  notes 

Congress  arises,  as  in  the  legal  tender  cases,  and  in  bankruptcy  cases,  it 
does  not  depend  upon  the  incidental  effect  of  its  exercise  on  contracts, 
but  on  the  existence  of  the  power  itself." 
1  Knowlton  u.  Moore,  supra- 


§  505  TPIE  TAXING  POWER  OF  CONGRESS.  673 

from  circulation,  so  as  to  open  the  means  for  circulating 
the  n#tes  of  the  national  )3anks  organized  by  Congress. 
This  act  was  said  by  Justice  Miller  ^  to  be  a  forcible  illustra- 
tion of  the  famous  saying  of  Chief  Justice  Marshall:  "  The 
power  to  tax  is  the  power  to  destroy."  It  was  sustained 
by  the  Supreme  Court. ^  The  argument  was  advanced  that 
the  tax  was  direct  and  therefore  should  have  been  appor- 
tioned to  the  States,  and  that  it  impaired  a  franchise 
granted  by  them,  but  the  court  said,  in  an  opinion  by  Chief 
Justice  Chase,  that  these  objections  were  untenable  ;  that  it 
was  a  duty  or'  excise  tax,  and  not  direct ;  that  franchises 
granted  by  the  State  are  subject  to  taxation  like  other  prop- 
erty, and  even  if  the  tax  was  excessive  and  indicative  of  a 
purpose  to  destroy  the  franchise,  that  was  a  question  for 
Congress  and  not  for  the  court.  But  apart  from  this, 
Congress  having  undertaken  to  provide  a  currency  for  the 
whole  country,  it  could  constitutionally  secure  the  benefit 
of  it  to  the  people  by  appropriate  legislation.  It  could 
therefore  by  suitable  enactments  restrain  the  circulation,  as 
money,  of  any  notes  not  issued  under  its  own  authority. 

The  act  provided  that  this  tax  should  be  paid  by  any 
bank  on  the  notes  of  any  town,  city  or  municipal  corpora- 
tian  paid  out  by  it,  and  the  court  enforced  the  collection  of 
the  tax  against  the  National  Bank  of  Little  Eock  on  ac- 
count of  notes  issued  by  the  city  of  Little  Rock  and  paid 
out  by  the  bank.  The  court  said  ^  that  the  tax  was  not 
laid  on  the  obligation,  but  on  its  use  in  a  particular  way; 
that  a  municipality  could  not,  against  the  law  of  Congress, 
put  its  notes  in  circulation  as  money,  and  that  the  bank 

1  In  Loan  Assn.  u.  Topeka,  20  Wall.  1.  c.  663. 

2  Veazie  Bank  v.  Fennell,  8  Wall.  533.  Justices  Nelson  and  Davis 
dissented,  holding  that,  while  Congress  had  power  to  tax  the  property  of 
the  banks,  the  tax  in  question  was  really  one  upon  the  powers  and  facul- 
ties of  the  State  to  create  the  banks,  and  the  decision  in  fact  struck  at 
this  latter,  which  was  essential  to  the  sovereignty  of  the  States. 

3  National  Bank  v.  United  States,  101  U.S.  1. 

43 


674  THE  TAXING  POWER  OF  CONGRESS.  §  506 

which  helped  to  keep  up  the  use  by  paying  them  out,  that 
is,  employing  them  as  the  equivalent  of  money  in  discharg- 
ing its  obligations,  was  taxed  for  what  it  did.  "  The  tax- 
ation was  no  doubt  intended  to  destroy  the  use.  But  that, 
as  has  just  been  seen,  Congress  had  the  power,  to  do." 

§  506.  Taxing  power   of   Congress   and   police  power  of 
State. 

While  Congress  may  thus  tax  any  property  or  franchise 
enjoyed  under  State  authority,  the  exercise  of  its  power  of 
taxation  can  give  no  rights  as  against  the  lawful  exercise  of 
the  police  power  of  the  State.  In  other  words.  Congress 
cannot  authorize  a  trade  or  business  within  a  State  where  it 
is  prohibited  in  order  to  tax  it.  A  license  granted  by 
Congress  therefore  may  prohibit  the  carrying  on  of  the 
business  before  payment  of  the  tax,  but  this  is  only  a  mode 
of  enforcing  the  payment.  Such  licenses,  so  far  as  they 
relate  to  trade  within  the  State  limits,  give  no  authority 
to  carry  on  the  business,  and  can  give  none.  They  simply 
express  the  purpose  of  the  government  not  to  interfere  by 
penal  proceedings  with  the  trade,  if  the  taxes  are  paid.  It 
follows  therefore  that  a  party  failing  to  take  out  a  license 
thus  required  may  be  indicted  therefor.  On  the  other 
hand,  the  possession  of  a  license  from  the  Federal  govern- 
ment to  sell  liquors  is  no  bar  to  an  indictment  under  a  State 
law  prohibiting  such  sales. ^ 

1  McGuire  v.  Commonwealth,  3  Wallace  387,  License  Tax  Cases,  5 
Wall.  462;  Pervear  w.  Commonwealth,  5  Wall.  475.  It  was  held  in 
Massachusetts,  Commonwealth  v.  Crane,  158  Mass.  218,  that  a  statute 
requiring  everyone  selling  oleomargarine  from  a  vehicle  to  put  on  both 
sides  of  the  vehicle  the  sign  •'  Licensed  to  sell  oleomargarine,"  was  not 
in  conflict  with  the  Act  of  Congress  of  August  2d,  1886,  taxing  and  licens- 
ing the  sale  of  oleomargarine.  The  court  said  that  defendant's  pos- 
session of  a  license  under  the  Act  of  Congress  afforded  him  no  immunity 
from  the  police  control  of  the  State. 


§   507  THE  TAXING  POWER  OF  CONGRESS.  675 

This  subject  was  also  considered  by  the  Supreme  Court 
in  reference  to  the  Act  of  Congress  of  August  2,  1886, 
imposing  special  taxes  upon  manufacturers  of  oleomarga- 
rine, as  well  as  upon  the  wholesale  and  retail  dealers  in 
that  compound.  The  State  of  Massachusetts  enacted  a  law 
prohibiting  the  manufacture  or  sale  of  oleomargarine  in 
imitation  of  butter.  It  was  claimed  that  this  latter  act 
was  an  interference  with  interstate  commerce,  as  Congress 
had  legislated  fully  on  the  subject.  But  the  Supreme 
Court  said  ^  that  the  Act  of  Congress  was  not  intended  as 
a  regulation  of  commerce  between  the  States,  and  that  the 
taxes  prescribed  by  that  act  were  imposed  for  national  pur- 
poses. Their  imposition  did  not  give  authority  to  those 
who  paid  them  to  engage  in  the  manufacture  or  sale  of 
oleomargarine  in  any  State  whose  law  forbade  such  manu- 
facture or  sale,  or  to  disregard  any  regulation,  which  the 
State  might  lawfully  prescribe  in  reference  to  that  act. 

§  507.  Municipal  corporations    subject   to    internal   rev- 
enue taxation. 

A  municipality  which  engages  in  the  business  of  distil- 
ling spirits  is  not  exempt  from  the  tax  levied  upon  that 
business  by  the  United  States,  and  it  is  immaterial,  so  far 
as  the  liability  to  the  tax  is  concerned,  that  it  had  no 
lawful  authority  to  engage  therein.  Salt  Lake  City, 
in  what  was  then  the  Territory  of  Utah,  set  up  this  claim 
in  a  suit  against  the  collector  to  recover  the  amount   of 

1  Plumley  v.  Massachusetts,  155  D.  S.  461.  It  was  also  held  in  this 
case  that  the  doctrine  of  Leisy  v.  Hardin,  135  U.  S.  100,  did  not  justify 
the  contention  that  the  State  was  powerless  to  prevent  the  sale  of  deceit- 
ful imitations  of  articles  of  food  in  general  use  among  the  people.  On 
this  point  Chief  Justice  Fuller  and  Justices  Field  and  Brewer  dissented, 
denying  that  a  State  can  exclude  from  commerce  legitimate  objects  of 
commercial  dealings  because  of  the  possibility  that  their  appearance 
may  deceive  purchasers  in  regard  to  their  qualities. 


676  THE  TAXING  POWER  OF  CONGEESS.  §   508 

taxes  alleged  to  have  been  illegally  exacted.     But  the  court 
in  an  interesting  opinion  by  Justice  Miller,  said:  ^  — 

"A  municipal  corporation  cannot,  any  more  than  any 
other  corporation  or  private  person,  escape  the  taxes  due 
on  its  property,  whether  acquired  legally  or  illegally,  and  it 
cannot  make  its  want  of  legal  authority  to  engage  in  a  par- 
ticular transaction  or  business  a  shelter  from  the  taxation 
imposed  by  the  government  on  such  business  or  transaction 
bv  whomsoever  conducted." 

§  508.  Diminution  of  salaries  by  taxation. 

The  Constitution  of  the  United  States  provides  that  the 
compensation  of  the  judges  both  of  the  Supreme  and 
inferior  Federal  courts  shall  not  be  diminished  during 
their  continuance  in  office, ^  and  that  the  compensation  of 
the  President  shall  neither  be  increased  nor  diminished 
during  the  period  for  which  he  shall  have  been  elected.^ 
An  income  tax  was  imposed  during  the  Civil  War  upon  the 
salaries  of  both  the  judges  and  the  President,  on  the 
ground  that  it  did  not  diminish  their  salaries  but  only  im- 
posed a  tax,  and  hence  did  not  violate  the  constitutional 
provisions.  But  Chief  Justice  Taney,  on  February  16, 
1863,  in  behalf  of  the  court,  in  a  letter  to  the  Secretary  of 
the  Treasury,  protested  that  such  exaction,  although  called 
an  income  tax,  was  nevertheless  a  diminution  of  salaries, 
in  violation  of  the  Constitution.  The  matter  was  not 
acted  on  at  the  time,  but  subsequently,  on  October  23, 
1869,  the  Attorney-General  of  the  United  States,  Hon. 
E.  E.  Hoar,  in  a  written  opinion,  advised  the  Secretary  of 
the  Treasury  to  the  same  effect.*     The  amounts  collected 

1  Salt  Lake  City  v.  Hollister,  118  U.  S.  256,  1.  c.  p.  262. 

2  Article  III,  Sec.  1. 

3  Article  II,  Sec.  1,  Par.  7. 

4  Opinions  of  Attorney-Generals,  vol.  13,  p.  161;  see  also  Mis.  Docs., 
No.  214,  53d  Congress,  2cl  Session,  containing  a  copy  of  the  letter  of 
Chief  Justice  Taney. 


§   509  THE  TAXIXG  POA\TER  OF  CONGRESS.  677 

were  afttrwards  returned.  The  opinion  of  the  Attorney- 
General  advised  that,  under  the  doctrine  of  Dobbins  v. 
Erie  County/  the  compensation  of  an  officer  of  the  United 
States  fixed  by  a  law  of  Congress  is  not  subject  to  taxation 
under  State  authority,  because  the  effect  of  such  a  tax 
would  be  to  diminish  the  compensation  which  the  officer  is 
by  law  entitled  to  receive,  and  that,  as  Congress  is  pro- 
hibited by  the  Constitution  from  diminishing  the  salaries 
paid  the  President  and  the  judges  during  their  respective 
terms  of  office,  it  can  no  more  diminish  such  salaries  by 
imposing  excise  taxes  or  duties  thereon  and  deducting  the 
amount  from  them ,  than  can  a  State  make  such  deductions 
from  the  salary  of  an  officer  of  the  United  States.  The 
tax  operates  as  a  direct  diminution  of  the  compensation  of 
the  officer  in  either  case.^ 

§  509.  Progressive  taxation. 

It  was  strongly  urged  in  Knowlton  v.  Moore,  supra, 
that  the  progressive  feature  of  the  inheritance  tax  of 
1898  was  invalid,  and  so  repugnant  to  fundamental  princi- 
ples of  equality  and  justice,  that  the  law  should  be  held 
void,  even  though  it  transgressed  no  express  limitation  of 
the  Constitution.  The  court  had  already  held  ^  that  the 
progressive  feature  in  the  inheritance  tax  of  Illinois  was  not 
violative  of  the  Fourteenth  Amendment.  Such  provisions 
however  had  been  held  invalid  by  some  of  the  State  courts,* 
as  violating  the  uniformity  required  hy  their  respective  con- 
stitutions. The  court  declined  to  intimate  in  the  opinion 
as  to  whether  it  had  the  right  to  exercise  the  power  thus 
invoked,  of  declaring  void  a  statute  not  in  conflict  with  any 

1  Supra,  §  14. 

2  See  Miller's  Lectures  on  Const.,  p.  247. 

3  Against  the  strong  dissent  of  Mr.  Justice  Brewer,  supra,  p.  585, 
note. 

*  Supra,  §  449. 


678  THE  TAXING  POWER  OF  CONGRESS.  §   510 

express  provision  of  the  Constitution,  and  said  that  the  facts 
in  the  case  before  them  did  not  justify  them  in  declaring 
the  tax  in  question  invalid.  It  said  that  some  authorita- 
tive thinkers  and  a  number  of  economic  writers  contend 
that  a  progressive  tax  is  more  just  and  equal  than  a  propor- 
tionate one,  and  that,  in  the  absence  of  constitutional  provi- 
sions, the  question  whether  it  is  or  not  is  legislative  and  not 
judicial.  In  answer  to  a  suggestion  of  the  grave  consequences 
of  recognizing  the  right  to  levy  progressive  taxes,  the 
court  said  at  page  109  :  "  If  a  case  should  ever  arise,  where 
an  arbitrary  and  confiscatory  exaction  is  imposed  bearing 
the  guise  of  a  progressive  or  any  other  form  of  tax,  it  will 
be  time  enough  to  consider  whether  the  judicial  power  can 
afford  a  remedy  by  applying  inherent  and  fundamental  prin- 
ciples for  the  protection  of  the  individual,  even  though 
there  be  no  express  authority  in  the  Constitution  to  do  so. 
That  the  law  which  we  have  construed  affords  no  ground 
for  the  contention  that  the  tax  imposed  is  arbitrary  and 
confiscatory,  is  obvious."  * 

§  510.  Scope  of  Federal  taxing  power. 

The  great  scope  of  the  Federal  taxing  power  is  illustrated 
in  the  decision  of  the  court  sustaining  the  provision  of  the 
Spanish  War  Revenue  Act  of  1898,  imposing  a  tax  upon 
sales  made  upon  boards  of  trade  or  exchanges. ^  This  tax 
was  upon  any  sales  or  agreements  of  sale  at  any  exchange 
or  board  of  trade,  or  other  similar  place,  either  for  present 
or  future  delivery,  and  required  a  memorandum  to  be 
delivered  by  the  seller  to  the  buyer  in  every  such  case, 
to  which  should  be  affixed  a  stamp  or  stamps  equal  in 
value   to  the  amount  of  the  tax.      It  was  claimed  that  this 

1  Justice  Brewer  dissented  from  so  much  of  the  opinion  as  held  that  a 
progressive  rate  of  tax  can  be  validly  imposed,  adhering  to  the  views  ex- 
pressed by  him  in  the  Illinois  case,  supra,  §  449. 

2  Nicol  V.  Ames,  173  U.  S.  509. 


§  510        THE  TAXING  POWER  OF  CONGRESS.  G79 

tax  was  an  illegal  interference  with  the  internal  commerce 
of  the  States;  that  Congress  had  no  power  to  require  a. 
written  memorandum  to  be  made  of  transactions  within 
the  State,  so  that  a  stamp  might  be  placed  thereon ;  that 
there  was  no  proper  basis  for  a  privilege  tax,  and  that  it 
was  in  effect  a  direct  tax.  But  the  court  held  that  none 
of  these  objections  were  well  founded.  It  said  that  this 
was  not  a  direct  tax  in  the  constitutional  sense,  usiuo;  the 
language  already  quoted.^  It  was  not  a  tax  on  the  proj5- 
erty,  but  on  the  privilege,  or  for  the  facilities  afforded  at 
exchanges  or  boards  of  trade  for  the  transaction  of  busi- 
ness, and  was  therefore  in  the  nature. of  a  duty  or  excise. 
It  was  not  lacking  in  uniformity  either  in  the  intrinsic  or 
geographical  sense,  and  there  was  no  legal  interference 
with  commerce  in  the  State. 

And  the  court  added,  p.  516:  — 

*'  In  searching  for  proper  subjects  of  taxation  to  raise 
moneys  for  the  support  of  the  government,  Congress 
must  have  the  right  to  recognize  the  manner  in  which  the 
business  of  the  country  is  actually  transacted ;  how, 
among  other  things,  the  exchange  of  commodities  is 
effected;  what  facilities  for  the  conduct  of  business  exist; 
what  is  their  nature  and  how  they  operate ;  and  what, . 
if  any,  practical  and  recognizable  distinction  there  may  be 
between  a  transaction  which  is  effected  by  means  of  using 
certain  facilities,  and  one  where  such  facilities  are  not 
availed  of  by  the  parties  to  the  same  kind  of  a  transaction. 
Having  the  power  to  recognize  these  various  facts,  it  must 
also  follow  that  Congress  is  justified,  if  not  compelled,  in 
framing  a  statute  relating  to  taxation,  to  legislate  with 
direct  reference  to  the  existing  conditions  of  trade  and 
business  throughout  the  whole  country  and  to  the  manner 
in  which  they  are  carried  on." 

1  Supra,  §  488. 


680  THE  TAXING  PO^\^R  OF  CONGRESS.  §    511 

§  511.  Taxing  power   of  Congress  in  relation   to  inter- 
state commerce. 

The  power  of  Congress  over  interstate  commerce  is  de- 
clared in  the  same  clause  of  the  Constitution  with  the 
power  over  foreign  coinmerce.  Congress  is  given  power  to 
regulate  commerce  with  foreign  nations  and  among  the 
several  States  and  with  the  Indian  tribes ;  and  this  power, 
in  the  language  of  the  Supreme  Court,  acknowledges  no 
limitations  other  than  those  prescribed  in  the  Constitution.^ 
The  Supreme  Court  in  several  cases  has  declared  that  Con- 
gress has  the  same  power  over  interstate  commerce  as 
over  foreign  commerce. ^  This  language  however  was 
used  in  cases  which  involved  State  interference  with  inter- 
state commerce,  and  in  connection  with  the  assertion  that 
the  States  can  no  more  interfere  with  such  commerce  than 
with  foreign  commerce.  On  the  other  hand,  it  has  been 
argued  that  the  power  over  domestic  commerce  is  not  iden- 
tical with  the  power  over  commerce  with  foreign  nations 
and  with  the  Indians,  for  the  United  States  deals  with  a 
foreio-n  nation  as  one  sovereign  with  another;  and  that  the 
rio-ht  to  interdict  foreign  commerce  which  may  inhere  in 
the  power  to  regulate  commerce  with  foreign  or  dependent 
nations,  cannot  be  attributed  by  analogy  to  the  power  to 
regulate  our  own.^ 

Comprehensive  as  is  the  commerce  power  in  the  Consti- 
tution, the  taxing  power  is  clearly  distinct  and  is  expressly 
limited  by  the  quahfications  and  exceptions  stated.  Thus 
the  Constitution  provides*  that  no  preference  shall  be 
given  by  any  regulation  of  commerce  or  revenue  to  the 
ports  of  one  State  over  those  of  another. 

1  Leisy  v.  Hardin,  135  U.  S.  108. 

2  Crutcher  v.  Kentucky,  141  U.  S.  47,  57;  Pittsburgh  Co.  v.  Bates,  156 
U.  S.  577,  587;  Brown  v.  Houston,  114  U.  S.  630. 

3  Randolplion  Law  and  Policy  of  Annexation,  pp.  94  to  98. 
•*  Article  I,  Sec.  9,  Par.  5. 


5  511        THE  TAXING  PO"\^'ER  OF  CONGRESS.  681 

Congress,  in  levying  taxes  under  the  constitutional  grant, 
is  not  restrained,  as  are  the  States,  from  interfering  with 
interstate  commerce.  Thus  it  may  levy,  subject  to  the 
requirement  of  geographical  uniformity,  indirect  taxes  or 
excises  on  the  subjects  or  facilities  of  commerce,  as  in  the 
stamp  duties  levied  upon  the  bills  of  lading  of  public 
carriers  and  telegraph  messages.  This  the  States  cannot 
do.  Under  the  rule  laid  down  however  in  the  Income 
Tax  Cases,  supra,  as  reaffirmed  in  Knowlton  v.  Moore, 
supra.  Congress  cannot  tax  directly  any  property, 
whether  of  individuals  or  corporations,  solely  with  refer- 
ence to  the  general  ownership  of  such  property,  except 
upon  the  rule  of  apportionment ;  and  this  requirement  of 
apportionment  would,  under  this  rule,  apply  to  the  direct 
taxation  of  propert}^  employed  in  interstate  commerce. 

The  question  was  discussed,  though  not  decided,  in 
Dooley  v.  United  States, i  whether  Congress  could  lay  an 
export  tax  upon  the  merchandise  carried  from  one  State  to 
another.  Justice  Brown  said  that  the  question  was  not 
involved  in  the  case,  but  intimated  that,  while  such  a  tax 
is  not  forbidden  by  express  words  in  the  Constitution,  it 
would  be  extremely  difficult  if  not  impossible  to  lay  such  a 
tax  without  violation  of  the  requirement  that  all  duties, 
imposts  and  excises  shall  beuniform  throughout  the  United 
States.  Justice  White  in  his  concurring  opinion,  page  165, 
said ;  — 

'*  Certainly  the  argument  cannot  be  that  because  a 
power  has  been  conferred  upon  Congress  by  the  Con- 
stitution to  levy  a  tax  on  foreign  commerce,  therefore 
the  Constitution  has  taken  away  from  Congress  power 
to  tax  even  indirectly  domestic  commerce."  He  quoted 
the  language  of  Chief  Justice  Chase  in  the  License  Tax 
Cases, 2  that   the   taxing  power  of    Congress,    as   limited 

1  183  U.  S.  151. 

2  5  Wallace  462,  471. 


682  THE  TAXING  POWER  OF  CONGRESS.  §   512 

by  the  Constitution,  and  thus  only,  reaches  every  sub- 
ject, and  may  be  exercised  at  discretion,  adding:  "Of 
course,  the  Constitution  contemplates  freedom  of  com- 
merce between  the  States,  but  it  also  confers  upon  Con- 
gress the  powers  of  taxation  to  which  I  have  referred." 

The  dissenting  opinion,  by  Justices  Fuller,  Peckham, 
Brewer  and  Harlan,  said  that  the  power  to  regulate  inter- 
state commerce  was  granted  in  order  that  trade  between 
the  States  might  be  left  free  from  discriminating  legisla- 
tion, and  not  to  impart  the  power  to  create  antagonistic 
relations  between  them.  If  the  power  of  regulation  was 
absolutely  unrestricted  as  respects  interstate  commerce, 
then  the  very  unity  the  Constitution  was  framed  to  secure 
could  be  set  at  naught  by  a  legislative  body  created  by  that 
mstrument.  It  was  also  said  that  "  Congress  may  lay  local 
taxes  on  territories,  affecting  the  persons  or  property 
therein,  or  authorize  territorial  legislatures  to  do  so,  but 
it  cannot  lay  tariff  duties  on  articles  exported  from  one 
State  to  another,  or  from  any  State  to  the  territories,  or 
from  any  State  to  foreign  countries,  or  grant  a  power  in 
that  regard  which  it  does  not  possess."  i 

§  512.  Congress  may  increase  excise  as  well  as  property 
tax. 

The  power  of  taxation  is  not  exhausted  when  once  ex- 
ercised. Taxes  are  not  debts  in  the  sense  that  having  been 
once  established  and  paid  all  further  liability  of  the  individ- 
ual to  the  government  ceases.  Thus  the  Supreme  Court 
said  in  a  recent  case  :2  "  The  obligation  of  the  individual  to 
the  State  is  continuous  and  proportioned  to  the  extent  of 
the  public  wants.  No  human  wisdom  can  always  foresee 
what  may  be  the  exigencies  of  the  future,  or  determine  in 

1  See  also  remarks  of  Justice  Brewer  in  Fairbank  v.  U.  S.,  supra, 
§497. 

2  Patton  V.  Brady,  18i  U.  S.  608,  619. 


§   513  4    THE  TAXING  POWER  OF  CONGRESS.  683 

advance  exactly  what  the  government  must  have  in  order 
« to  provide  for  the  common  defense '  and  '  promote  the 
general  welfare.'  *  *  *  Taxation  may  run ^aH ^ja.ssw 
with  expenditure.  *  *  *  Courts  may  not  in  this  re- 
spect revise  the  action  of  Congress."  If  emergencies  arise 
and  Congress  "determines  in  whole  or  in  part  on  tax,  that 
means  an  increase  in  the  existing  rate  or  perhaps  in  the 
subjects  of  taxation,  and  the  judgment  of  Congress  in 
respect  thereto  is  not  subject  to  judicial  challenge." 

This  principle  was  applied  by  the  court  to  the  increased 
excise  tax  upon  manufactured  tobacco.  The  court  said 
that  not  only  may  a  general  tax  be  imposed  upon  property, 
which  has  once  paid  an  excise  tax,  but  an  excise  tax  may 
be  increased,  at  least  while  the  property  is  held  for  sale, 
and  before  it  has  passed  into  the  hands  of  the  consumer. 
The  exercise  of  the  power  is  limited  solely  by  the  rule  of 
geographical  uniformity. 

§  513.  Taxation  of  property  of  non-resident  aliens. 

The  taxing  power  of  Congress  extends  to  all  the  subjects 
of  taxation  within  its  jurisdiction,  and  therefore  includes, 
if  Congress  deems  proper,  the  property  of  alien  non-resi- 
dents, which  is  localized  within  the  jurisdiction.  Thus, 
under  the  Internal  Eevenue  Act  of  1866,  a  tax  was  imposed 
on  alien  non-resident  holders  of  securities  of  domestic  rail- 
road companies.  The  court  had  expressed  a  doubt  as  to  the 
validity  of  such  atax,i  but  it  was  held  that  the  tax  levied  by 
the  Act  of  1866  was  essentially  an  excise  on  the  business  of 
that  class  of  corporations  and  properly  collectible  from  the 
company.  The  tax  was  really  levied  on  the  corporation 
which  paid  the  interest,  not  on  the  bondholders  who  received 
it,  and  it  was  therefore  immaterial  where  the  latter  resided.2 

1  Railroad  Co.  v.  Jackson,  7  Wall.  262. 

2  Railroad  Co.  v.  Collector,  100  U.  S.  595;  and  United  States  v.  Erie 
Ry.  Co.,  106  U.  S.  327,  Justice  Field  dissenting. 


684  THE  TAXING  POWER  OF  CONGRESS.  §   514 

As  in  the  case  of  State  taxation,  it  is  a  question  of  construc- 
tion and  not  of  power,  whether  such  property  of  alien  non- 
residents is  subjected  to  taxation.  Thus  the  inheritance  tax 
law. of  1898  was  construed  as  not  applying  to  the  estates  in 
this  country  of  decedents  domiciled  abroad,  although  the 
Supreme  Court  held  that  it  is  within  the  power  of  Con- 
gress to  impose  an  inheritance  tax  upon  property  in  this 
country,  no  matter  where  it  is  owned  or  transmitted,  pro- 
vided the  intention  to  tax  is  expressed  in  clear  and  unam- 
bio-uous  language.!  The  same  ruling  was  made  in  a  case 
where  the  will  of  the  alien  was  actually  executed  in  this 
country,  the  court  holding  that  Congress  had  not  expressed 
the  intention  to  subject  such  estates  to  taxation. 2 

§  614.  Taxation  of  property  of  residents  invested  abroad. 

The  same  principle,  that  the  sovereign  power  of  the  tax- 
ing authority  extends  over  all  subjects  of  taxation  within 
its  jurisdiction,  which  was  enforced  in  Kirtland  v.  Hotch- 
kiss,  an  analogous  case  of  State  taxation,  where  the  court 
held  that  a  State  can  tax  her  resident  citizens  for  debts  held 
by  them  against  non-residents  and  secured  by  a  mortgage 
on  property  in  another  State, ^  was  applied  to  a  tax  levied 
by  Congress  upon  the  property  of  residents  located  in 
another  jurisdiction.  Thus,  in  a  suit  4=  brought  by  a  bank 
in  California  to  recover  taxes  alleged  to  have  been  illegally 
levied  and  collected  on  its  capital,  because  part  of  the 
capital  was  invested  in  foreign  countries,  the  court  said 
that  the  case  was  controlled  by  the  principle  announced  in 

1  Eidman  v.  Martinez,  18i  U.  S.  578.  The  opinion  in  this  case  con- 
tains a  careful  review  of  the  decisions  in  England  and  in  the  different 
States  of  this  country,  on  the  subject  of  the  application  of  inheritance 
tax  laws  to  property,  within  the  jurisdiction,  of  decedents  domiciled 
abroad.     See  also  United  States  v.  Hunnewell,  13  Fed.  Rep.  617. 

2  Moore  u.  Ruckgaber,  184  U.  S.  593. 

3  Kirtland  v.  Hotchiiiss,  100  U.  S.  491,  supra,  §  421. 

4  Sedgwick  u.  Bank,  104  U.  S.  111. 


§   515  THE  TAXING  POWER  OF  CONGRESS.  685 

•r 
Kirtland  v.  Hotchkiss.  The  bank  was  subject  to  the 
sovereio-n  power  of  the  United  States  and  a  proper  object 
of  taxation.  "  The  investments  abroad  are  still  the  prop- 
erty of  the  bank  and  part  of  its  capital.  In  the  absence 
of  any  averments  to  the  contrary,  we  must  presume  they 
were  such  as  banks  usually  make  in  doing  a  banking 
business,  and  that  their  legal  situs  was  at  the  home  office 
of  the  corporation.  We  need  not  consider,  therefore, 
whether,  if  they  had  been  made  in  fixed  property  subject 
exclusively  to  another  jurisdiction,  a  different  rule  would 
apply." 

§  515.  Taxing  power  of  Congress  over  Territories. 

The  status  of  the  territories  with  reference  to  the  uni- 
formity clause  of  the  Constitution  was  discussed  in  the 
Insular  Decisions,  and  the  judges  concurred  in  the  opinion, 
though  on  different  grounds,  that "  incorporated  "  territories 
of  the  Union  are  entitled  to  all  the  privileges  of  the  Con- 
stitution, including  the  protection  of  the  uniformity  clause 
in  Federal  taxation. i 

The  power  of  Congress  over  the  territories  is  general 
and  plenary,  arising  from  the  right  to  acquire  the  territory 
itself,  and  the  power  given  by  the  Constitution  to  make  all 
needful  rules  and  regulations  restricting  territory  belonging 
to  the  United  States. 2  Congress,  in  the  exercise  of  its 
power  to  organize  and  govern  the  territories,  combines 
Federal  and  State  authority.  It  may  not  only  abrogate 
laws  of  the  Territorial  legislature,  but  it  may  itself  legislate 
directly  for  the  local  government.  It  may  make  a  void 
act  of  the  Territory  valid  and  a  valid  act  void.  It  was  said 
by  the  Supreme  Court    through  Justice    Bradley  in   the 

1  §  495,  supra.  In  the  opinion  of  Mr.  Justice  B  own,  this  was  based 
upon  the  action  of  Congress  in  extending  the  Constitution  and  laws  of 
the  United  States  over  the  territories. 

2  Mormon  Church  v.  United  States,  136  U.  S,  1. 


686  THE  TAXING  POWER  OF  CONGRESS.  §    ^1<3 

Mormon  Church  case,  page  44;  "  Doubtless  Congress,  in 
legislating  for  the  territories  would  be  subject  to  those 
fundamental  limitations  in  favor  of  personal  rights  which 
are  formulated  in  the  Constitution  and  its  amendments; 
but  these  limitations  would  exist  rather  by  inference  and 
the  general  spirit  of  the  Constitution  from  which  Congress 
derives  all  its  powers,  than  by  any  express  and  direct  appli- 
cation of  its  provisions." 

In  the  organization  of  the  incorporated  Territories,  Con- 
gress has  conferred  the  power  of  local  taxation.  Under 
the  general  territorial  system,  as  expressed  in  the  various 
organic  acts,  the  power  of  local  taxation  in  the  Territorial 
governments  is  absolute,  save  as  restricted  by  the  consti- 
tutional or  congressional  enactments.  Thus  it  was  held 
that  the  Territories  of  the  United  States  have  the  power  of 
taxinof  the  national  bank  shares  to  the  same  extent  as  the 
States,  that  is,  equally  with  other  moneyed  capital,  although 
*' Territories"  are  not  mentioned  in  the  National  Banking 
Act.  The  court  said  that  the  word  "State"  in  national 
legislation  of  the  character  of  the  National  Banking  Act 
should  be  construed  as  including  Territories.!  Congress 
therefore  has  plenary  power  to  establish  such  system  of 
local  taxation  in  the  Territories,  directly  or  through  the 
authority  given  to  the  Territorial  legislature,  as  it  deems 
proper;  but  duties  imposts  and  excises,  levied  for  national 
purposes  by  the  United  States,  must  be  uniform  over  the 
oro-anized  and  incorporated  Territories  as  well  as  in  the 
States. 

§  5 16.  Taxation  in  District  of  Columbia. 

The  same  general  principle  applies  to  congressional 
taxation  in  the  District  of  Columbia.  Congress  is  vested 
by   the   Constitution  with    exclusive   legislative  authority 

1  Talbott  V.  Silver  Bow  County,  139  U.  S.  438. 


§    516  THE  TAXING  POAVER  OF  CONGRESS.  687 

over  the  District,  but,  irrespective  of  this  grant  of  power, 
as  was  decided  in  Loughborougli  v.  Blaise,!  the  District 
as  well  as  the  Territories  are  included  in  the  grant  of  the 
general  taxing  power.  The  sovereign  power  over  the 
District  therefore  is  lodged,  not  with  the  corporation 
created  by  Congress  for  its  administration,  but  in  the  gov^- 
ernment  of  the  United  States.  Its  essential  character  as  a 
municipal  corporation  has  not  been  changed  by  the  Act  of 
Congress,  abolishing  the  local  legislature  and  providing  for 
local  administration  through  apjDointed  officials. ^  The 
court  said  that  it  was  not  necessary  to  a  municipal  gov- 
ernment or  to  municipal  responsibility  that  the  officers 
should  be  elected  by  the  people.  "All  municipal  govern- 
ments are  but  agencies  of  the  superior  power  of  the  State 
or  government  by  which  they  are  constituted,  and  are 
invested  with  only  such  subordinate  powers  of  local  legis- 
lation and  control  as  the  superior  legislature  sees  fit  to 
confer  upon  them." 

Congress  however  is  the  legal  legislature  over  this 
municipality,  exercises  over  it  full  and  entire  jurisdiction 
both  of  a  political  and  municipal  nature,  and  may  legislate 
with  reference  to  people  and  property  therein,  as  may  the 
legislature  of  a  State  over  any  of  its  subordinate  munici- 
palities. Thus  it  is  within  the  constitutional  power  of 
Congress  to  tax  different  classes  of  property  in  the  District 
at  different  rates.  The  Supreme  Court  held  valid  an  act 
which  taxed  lands  within  the  District  outside  of  the  cities 
of  Washington  and  Georgetown,  used  solely  for  agricul- 
tural purposes,  at  $1.25  on  the  $100  and  all  other  real  and 
personal  property  in  the  District,  not  expressly  exempted, 
at  $1.50  on  the  $100,  saying  that,  in  the  exercise  of  this 
power,  Congress,   like  any   State    legislature   unrestricted 

1  Sxipra,  §  490. 

2  Metropolitan  Railroad  v.  District  of  Columbia,  132  U.  S.  1. 


688  THE  TAXING  POWER  OF  CONGRESS.  §   516 

by  constitutional  provisions,  may  at  its  discretion  wholly 
exempt  certain  classes  of  property  for  taxation,  or  may 
tax  them  at  a  lower  rate  than  other  property.! 

Congress  may  also  confer  upon  the  city  authority  to 
assess  adjacent  proprietors  with  the  expense  of  repairing 
streets, 2  and  the  tax  need  not  be  a  general  one  over  the 
city.  In  exercising  this  legislative  power  over  persons  and 
property  within  the  District,  Congress  can  also,  provided 
no  intervening  rights  are  impaired,  confirm  the  proceed- 
ings of  an  officer  in  the  District,  or  of  a  subordinate  munic- 
ipality or  other  authority  therein,  which,  without  such 
confirmation,  would  be  void,^  and  can  also  provide  for  the 
cost  of  a  public  improvement  to  the  District  by  assessing  a 
proportionate  part  on  the  property  specially  benefited.* 
It  was  held  in  this  case  that  the  United  States  possesses 
full  and  unlimited  jurisdiction,  both  of  a  political  and 
municipal  nature,  over  the  District,  including  the  power  of 
eminent  domain,  and  this  is  not  controlled  by  an}'^  provi- 
sion in  the  act  of  cession  by  the  State  of  Maryland. 

While  Congress  can  constitute  the  District  a  body  cor- 
porate for  municipal  purposes,  it  can  only  authorize  the 
municipality  thus  created  to  exercise  municipal  powers. 
It  cannot  therefore  delegate  legislative  power  to  levy  a  tax 
interfering  with  interstate  commerce.  Thus  an  act  of  the 
legislative  assembly  of  the  District  of  Columbia  established 
by    Congress,    requiring  commercial  agents  offering  mer- 

i  Gibbons  v.  District  of  Columbia,  116  U.  S.  i04. 

2  Willard  v.  Presbury,  14  Wall.  676. 

3  Mattingly  v.  District  of  Columbia,  97  U.  S.  687. 

4  Shoemaljer  v.  United  States,  147  U.  S.  282,  §  374,  sttpra.  In  tins 
case  it  was  claimed  that  the  owner  of  the  lands  should  be  allowed  in  the 
assessment  of  damages  for  the  value  of  prospective  gold  mines;  but  the 
Supreme  Court  sustained  the  court  below  in  holding  that,  if  there  were 
any  such  mines,  they  were  reserved  to  the  Crown  in  the  original  grant 
by  Charles  I  in  the  charter  to  Lord  Baltimore,  and  therefore  passed  to 
the  State  and  thence  to  the  United  States* 


§   517  THE  TAXING  POWER  OF  CONGRESS.  689 

chandise  for  sale  by  sample  to  take  out  and  pay  for  a 
license,  was  adjudged  void  ^  as  being  a  regulation  of  inter- 
state commerce;  and  not  within  the  authority  granted  by 
Congress,  nor  within  the  authority  which  Congress  was 
competent  to  grant.  It  was  argued  in  this  case  that  it  is 
beyond  the  power  of  Congress  to  pass  a  law  of  this 
character  solely  for  the  District  of  Columbia,  because 
whenever  Congress  acts  upon  the  subject,  the  regulations 
it  establishes  must  constitute  a  system  applicable  to  the 
whole  country.  The  court  said  that  the  disposition  of  the 
case  called  for  no  expression  upon  this  point. 

§  517.  Power  of  Congress  in  enforcing  collection  of  taxes. 

The  power  of  Congress  is  both  ' '  to  lay  and  collect 
taxes,"  and  the  grant  of  the  taxing  power  is  reinforced 
by  what  has  been  termed  the  ' '  co-efficient  power  ' '  con- 
tained in  the  last  paragraph  of  the  same  section ,2  "the 
power  to  make  all  laws  which  shall  be  necessary  and 
proper  for  carrying  into  execution  the  foregoing  powers 
and  all  other  powers  vested  by  this  Constitution  in  the 
government  of  the  United  States,  or  in  any  department 
or  officer  thereof. ' ' 

It  was  said  by  Mr.  Madison  in  the  Federalist:  ^  "Had 
the  Constitution  been  silent  on  this  head,  there  can  be 
no  doubt  that  all  the  particular  powers  requisite  as  means 
of  executing  the  general  powers  would  have  resulted  to 
the  government,  by  unavoidable  implication.  No  axiom 
is  more  clearly  established,  in  law,  or  in  reason,  than 
that  wherever  the  end  is  required,  the  means  are  author- 

'  Stoutenburgh  v.  Henuick,  129  U.  S.  141.  Justice  Miller  dissented 
OH  th3  ground  that  this  was  not  interstate  commerce,  as  the  District  of 
Coiurabia  was  not  a  State. 

8  2  Tucker  on  Const.,  p.  600;  Federalist  No.  33. 

*  Federalist,  No.  44. 

44 


690  THE  TAXING  POWER  OF  CONGRESS.  §   517 

ized;    wherever   a  general   power  to  do  a  thing  is  given, 
every  particular  power  for  doing  it  is  included,"  i 

It  follows  therefore  that  Congress  in  levying  taxes  has 
the  right  to  select  the  reasonable,  appropriate  and  custom- 
ar}^  methods  of  collection.  The  due  process  of  law  in  the 
Fifth  Amendment,  which  restrains  the  powers  of  Congress 
as  the  Fourteenth  Amendment  restrains  the  powers  of  the 
States,  is  consistent  with  summary  procedure  in  the  collec- 
tion of  taxes. 2  The  collection  of  the  direct  tax  upon  land 
levied  by  Congress  during  the  Civil  War  was  therefore 
enforced  through  the  sale  of  delinquent  lands,  the  collec- 
tion of  excises  and  duties  upon  commodities  by  summary 
seizure  and  forfeiture,  and  license  taxes  upon  business 
through  the  requirement  under  penalties  of  a  license  as  a 
condition  precedent  to  the  right  of  carrying  on  the  busi- 
ness. In  the  recent  Spanish  War  Revenue  Act,  the  tax 
upon  commercial  exchange  sales  was  collected  through  the 
requirement  of  a  stamped  memorandum  required  to  be  de- 
livered by  the  seller  to  the  buyer.  In  reply  to  the  argu- 
ment that  this  was  an  unreasonable  requirement  and  an 
interference  with  strictly  intra-state  commerce,  the  court 
said  3  that  Congress  might  have  required  a  sworn  report 
instead  of  a  memorandum,  but  whether  the  means  adopted 
was  the  best  and  most  convenient  was  a  question  for  the 
judgment  of  Congress,  and  its  decision  must  be  conclusive. 
"  As  Congress  had  the  power  to  impose  the  tax,  the  means 
adopted  for  its  collection  within  reasonable  and  rational 
limits  must  be  a  question  for  Congress  alone." 


1  McCuUough  V.  Maryland,  supra,  §  481. 

2  Murray  v.  Hoboken  Land  Co.,  suprU}  §  318. 

3  Nicol  V.  Ames,  173  U.  S.  524. 


CHAPTER     XYIII. 

THE   ENFORCEMENT   OF    FEDERAL    LIMITATIONS   UPON    THE 
TAXING  POWER. 

§  518.  Judicial  remedies  for  illegal  taxation. 

519.  Two  forums  for  Federal  question  in  taxation. 

520.  Amount  of  tax  as  affecting  procedure. 

521.  Pleading  Federal  question  in  U.  S.  Circuit  Courts. 

522.  Federal  question  and  right  of  removal. 

523.  Federal  question  on  writ  of  error  to  State  court. 

624.  Questions  of  fact  not  considered  on  writ  of  error  to  State  court. 

525.  "Writ of  error  is  to  highest  State  court  having  jurisdiction. 

526.  Practical  considerations  in  selection  of  procedure. 

527.  Jurisdiction  over  case  and  over  Federal  question  distinguished. 

528.  What  is  Federal  question  in  taxation. 

529.  Federal  right  must  be  set  up  in  adversary  proceeding. 

530.  Injunction  against  taxation  in  Federal  courts. 

531.  Want  of  adequate  remedy  at  law  must  be  shown. 

532.  Injunction  often  only  proper  remedy. 
633.  Procedure  in  Income  Tax  Cases. 

534.  Habeas  corpus  as  remedy  for  illegal  taxation. 

635.  Injunction  only  allowed  on  payment  of  taxes  actually  due. 

536.  When  application  must  first  be  made  to  State  board. 

637.  State  statutory  remedies    do  not  oust  equitable  jurisdiction  of 
Federal  courts. 

538.  State  can  only  be  sued  with  its  consent. 

539.  Suit  against  State  and  against  State  officials  distinguished. 

540.  Where    jurisdiction  depends  upon   party,  it  is  party  named  in 

record. 

541.  Collection  of   taxes  on   property  in   possession   of   receiver  of 

Federal  court. 

542.  Objections  to  jurisdiction  and  defenses  to  merits. 

543.  Judiciary  concluded  by  decision  of  political  department  of  gov- 

ernment. 
644.  No  equity  jurisdiction  in  Federal  courts  to  enforce  levy  of  tax. 

545.  Mandamus  to  issue  tax. 

546.  Mandamus  must  be  based  upon  statute  authorizing  tax. 

547.  Local  tax  laws  administered  in  Federal  courts. 

648.  Local  law  and  general  law  distinguished. 

649.  Suits  by  stockholders  in  right  of  corporation. 

(691) 


692  MATTERS  OF  PROCEDURE.  §  518 

§  550.  Burden  of  proof  in  resisting  taxation. 

551.  Federal  tax  cannot  be  enjoined. 

652.  Remedy  against  tax  ofHcials. 

553-  Importance  of  speedy  remedy  in  taxation. 


§  518.  Judicial  remedies  for  illegal  taxation. 

Where  a  tax  is  levied  under  the  provisions  of  an  uncon- 
stitutional act,  the  official  enforcing  such  tax  is  no  more 
justified  in  contemplation  of  law  than  if  the  act  had  not 
been  passed.  The  official  in  such  case  has  no  legal  sanc- 
tion for  his  conduct,  and  is  guilty  of  a  personal  violation 
of  the  taxpayer's  rights.  In  the  language  of  the  Supreme 
Court,  "  an  unconstitutional  act  is  not  a  law;  it  binds  no 
one  and  protects  no  one."  i 

It  is  a  cherished  maxim  of  the  law  that  where  there  is  a 
right  there  is  a  remedj'.  It  is  also  a  fundamental  principle 
of  our  jurisprudence  that  the  ordinary  courts  of  justice  are 
open  for  the  protection  of  the  citizen  against  those  act- 
ing under  governmental  authority  without  due  process  of 
law.  We  have  no  official  or  administrative  courts,  such  as 
those  in  the  Continental  States  of  Europe,  where  courts  of 
law  have  not  as  a  rule  the  power  to  decide  upon  the  legality 
or  illegality  of  the  administrative  acts  of  executive  officials.^ 
Such  controversies  in  our  jurisprudence  are  adjudged  and 
determined  by  the  due  course  of  law,  that  is,  by  the  law 
of  the  land,  wherein  the  official  stands  as  any  other  liti- 
gant, and  must  justify  by  due  process  of  law. 

"  No  man  in  this  country,"  said  Mr.  Justice  Miller,^  "is 
so  high  that  he  is  above  the  law.  No  officer  of  the  law 
may  set  that  law  at  defiance  with  impunity.     All  the  offi- 

1  Justice  Field  in  Huutington  v.  Worthen,  120  U.  S.  101. 

2  Brinton  Coxe,  "Judicial  Power  and  Unconstitutional  Legislation," 
chapter  102;  Introduction  to  Thayer's  "  Cases  on  Constitutional  Law," 
page  5. 

3  United  States  v.  Lee,  106  U.  S.  196,  p.  220. 


§  518  MATTERS  OF  PROCEDURE.  693 

cers  of  the  government,  from  the  highest  to  the  lowest, 
are  creatures  of  the  hiw,  and  are  bomid  to  obey  it."  i 

In  the  practical  regulation  of  the  remedial  procedure  of 
taxation,  these  fundamental  principles  must  be  reconciled 
with  the  public  necessity,  which  requires  that  the  collec- 
tion of  public  revenues  must  be  made  at  stated  periods, ^ 
with  the  principle  of  public  law,  which  prohibits  a  suit 
against  a  sovereign  State  except  with  its  own  consent  and 
under  conditions  imposed  by  itself,  and  with  the  principles 
of  public  policy  which  protect  administrative  officers  in  the 
erroneous  exercise  of  official  discretion,  and  executive 
officers  in  the  enforcement  of  process  regularlj^  issued  and 
fair  upon  its  face. 

It  is  not  within  the  scope  of  this  work  to  discuss  in 
detail  the  statutes  and  rules  regulating  the  jurisdiction  of 
the  Federal  courts,  still  less  is  it  the  purpose  to  consider 
the  varying  systems  of  procedure  of  the  several  States 
which  may  be  followed  in  testing  the  validity  of  State 
taxation.  Thus  some  States  collect  taxes  through  plenary 
actions  at  law,  wherein  the  illegality  of  the  tax  may  be 
pleaded  and  determined.^  In  other  States,  as  in  the  United 
States,  the  payment  of  taxes  under  protest,  with  an  action 

1  Judge  Dillon,  in  his  Laws  and  Jurisprudence  of  England  and  Amer- 
ica, p.  225,  says:  *'  Arbitrary  power  and  special  administrative  tribunals, 
such  as  we  find  in  France  and  other  countries,  administering  what  the 
French  call  di'oit  administratif,  do  not  exist.  In  England  the  same  law 
applies  to  all  persons,  and  it  is  administered  for  and  against  all  persons 
in  the  great  law  courts.  The  law  of  England  knows  nothing  of  excep- 
tional offenses  punished  by  extraordinary  tribunals.  So  also  direct 
personal  responsibility  for  torts  —  for  any  invasion  of  the  legal  rights  of 
another,  exists  without  limit  or  exception.  No  command  of  an  official, 
not  even  of  the  crown,  can  be  pleaded  in  bar  of  any  wrongful  act." 

2  "  If  there  existed  in  the  courts.  State  or  national,  any  general  power 
of  impeding  or  controlling  the  collection  of  taxes  by  relieving  the  hard- 
ship incident  to  taxation,  the  very  existence  of  the  government  might  be 
placed  in  the  power  of  a  hostile  judiciary."  Miller,  J.,  in  Cheatham  v. 
United  States,  92  U.  S.  89. 

3  As  in  Missouri,  see  author's  "Taxation  in  Missouri,"  Chapter   XV. 


694  MATTERS  OF  PROCEDURE.  §  519 

to  recover  back  the  amount  illegally  paid,  is  authorized 
and  regulated  by  statute. i  In  some  States  special 
statutory  procedure  for  determining  the  validity  of  taxa- 
tion and  the  equality  of  assessments  is  provided.  The 
questions  of  procedure  involving  the  construction  of  these 
widely  varying  statutes  will  be  found  in  the  local  statutes 
and  decisions.  The  subject  of  the  procedure  in  the  col- 
lection of  taxes,  required  by  due  process  of  law,  under  the 
Federal  and  State  constitutions,  has  been  considered. 2  It  is 
the  purpose  here  to  consider  only  those  matters  of  proced- 
ure, which  are  involved  in  determining  the  lawfulness  of 
the  exercise  of  the  taxing  power.  State  and  Federal,  under 
the  Constitution  of  the  United  States. 

§  519.   Two   forums    for   Federal    question    in    taxation. 

There  are  two  distinct  forums  and  modes  of  procedure 
for  securing,  on  the  Federal  question  in  taxation,  the 
judgment  of  the  Supreme  Court,  that  tribunal  being  the 
final  arbiter  in  the  construction  and  application  of  the 
Federal  Constitution  and  laws. 

One  method  of  procedure  is  by  raising  the  Federal  ques- 
tion, that  is,  the  claim  of  right  or  exemption  under  the 
Constitution  and  laws  of  the  United  States,  in  the  State 
court,  by  way  of  defense  in  whatever  proceeding  is  brought 
to  enforce  the  tax,  or  by  resisting  the  collection  in  what- 
ever form  of  proceeding  is  authorized  by  the  law  of  the 
State.  It  is  not  only  essential  that  the  claim  of  Federal 
right  should  be  distinctly  made  upon  the  record,  but  also 
that  the  procedure  adopted  in  resisting  the  tax  should  be 
appropriate  under  the  State  law,  as  the  decision  of  the 
State  court  upon  this  latter  question  is  conclusive.     If  the 

1  As  ia  Tennessee,  see  Tennessee  u.  Sneed,  96  U.  S.  69;  also  sections 
3226,  3228,  R.  S.  U.  S. 

2  Supra,  Chapter  XI. 


§  519  MATTERS  OF  PROCEDURE.  695 

Federal  claim  is  "  specially  set  up"  in  the  record,  and  de- 
cided adversely  by  the  highest  court  of  the  State  having 
jurisdiction,  that  decision  may  be  reviewed  upon  writ  of 
error  by  the  Supreme  Court. ^ 

The  other  method  of  procedure,  which  may  be  employed 
in  asserting  a  Federal  right  against  taxation,  is  by  invoking 
the  Federal  jurisdiction  in  the  first  instance  by  suit  in  the 
United  States  Circuit  Court  for  the  proper  district,  either 
on  the  ground  of  adverse  citizenship  if  it  exists  in  the  case, 
or  on  the  ground  that  the  case  arises  under  the  Constitu- 
tion and  laws  of  the  United  States. ^     When  suit  is  thus 

1  Sec.  709,  R.  S.  U.  S.  "  A  final  judgment  or  decree  in  any  suit  in  the 
highest  court  of  a  State,  in  which  a  decision  in  the  suit  could  be  had, 
where  is  drawn  in  question  the  validity  of  a  treaty  or  statute  of,  or  an 
authority  exercised  under,  the  United  States,  and  the  decision  is  against 
their  validity;  or  where  is  drawn  in  question  the  validity  of  a  statute  of, 
or  an  authority  exercised  under  any  State,  on  the  ground  of  their  being 
repugnant  to  the  Constitution,  treaties,  or  laws  of  the  United  States, 
and  the  decision  is  in  favor  of  their  validity;  or  where  any  title,  right, 
privilege  or  immunity  is  claimed  under  the  Constitution  or  any  treaty  or 
statute  of,  or  commission  held  or  authority  exercised  under,  the  United 
States,  and  the  decision  is  against  the  title,  right,  privilege,  or  immunity 
specially  set  up  or  claimed,  by  either  party,  under  such  Constitution, 
treaty,  statute,  commission  or  authority,  may  be  re-examined  and  re- 
versed or  affirmed  in  the  Supreme  Court  upon  writ  of  error.  The  writ 
shall  have  the  same  effect  as  if  the  judgment  or  decree  complained  of 
had  been  rendered  or  passed  in  a  court  of  the  United  States.  *  *  * 
The  Supreme  Court  may  reaffirm,  reverse,  modify  or  affirm  the  judgment 
or  decree  of  such  State  court,  and  may,  at  their  discretion,  award  exe- 
cution, or  remand  the  same  to  the  court  from  which  it  was  removed  by 
the  writ." 

2  It  is  provided  by  the  Act  of  1888,  amending  the  Judiciary  Act  of 
1875,  Sec.  1 :  "■  That  the  Circuit  Courts  of  the  United  States  shall  have 
original  cognizance,  concurrent  with  the  courts  of  the  several  States,  of 
all  suits  of  a  civil  nature,  at  common  law  or  in  equity,  where  the  matter 
in  dispute  exceeds,  exclusive  of  interest  and  costs,  the  sum  or  value  of 
$2,000.00,  and  arising  under  the  Constitution  or  laws  of  the  United 
States,  or  treaties  made,  or  which  shall  be  made,  under  their  authority, 
or  in  which  controversy  the  United  States  are  plaintiffs  or  petitioners,  or 
in  which  there  shall  be  a  controversy  between  citizens  of  different 
States,  in  which  the  matter  in  dispute  exceeds,  exclusive  of  interest  and 
costs,  the  sum  or  value  aforesaid."    *    *    * 


696  MATTERS  OF  PROCEDURE.  §   520 

brought  in  the  United  States  court,  the  unsuccessful  liti- 
gant may  go  directly  by  appeal,  if  in  equity,  or  by  writ  of 
error,  if  the  action  is  at  law,  to  the  Supreme  Court,  the 
appellate  jurisdiction  depending  only  on  the  claim,  in  the 
case  of  a  State  tax,  that  the  State  law  is  repugnant  to  the 
Constitution  of  the  United  States.  This  right  of  appeal 
extends  to  both  parties  and  the  whole  case  is  brought  to 
the  Supreme  Court. ^  The  construction  or  application  of 
the  Constitution  involved  in  the  case,  in  order  to  maintain 
such  an  appeal,  must  be  controlHng,  although  other  ques- 
tions may  be  open  to  determination  and  may  be  decided.^ 

§  ft20.  Amount  of  tax  as  affecting  procedure. 

Where  the  jurisdiction  of  the  Supreme  Court  is  invoked 
on  writ  of  error  to  the  highest  court  of  the  State  having 
jurisdiction,  the  amount  of  the  tax  involved  in  controversy 
is  immaterial ;  the  only  essential  is  the  denial  by  the  State 
court  of  a  Federal  right. ^  Neither  is  there  any  pecuniary 
hmit  in  the  appellate  jurisdiction  of  the  Supreme  Court  or 
of  the  Circuit  Court  of  Appeals  over  the  United  States 
Circuit  Court.* 

On  the  other  hand,  the  jurisdiction  of  the  United  States 

1  Loeb  V.  Columbia  Township,  179  U.  S.  472. 

2  Carey  v.  Housion  &  Texas  Cen.  Ry.,  150  U.  S.  171 ;  Horner  v.  United 
States,  143  U.  S.  570. 

3  In  a  recent  ease,  Sentell  v.  Railroad  Co.,  166  U.  S.  698,  the  Supreme 
Court  determined  on  writ  of  error  a  claim  for  the  value  of  a  dog,  and 
sustained,  as  valid  under  the  Fourteenth  Amendment,  a  statute  of 
Louisiana,  providing  that  no  dog  should  be  entitled  to  the  protection 
of  the  law  unless  placed  upon  the  assessment  rolls.  The  court  held 
also  that,  in  a  civil  action  for  killing  a  dog,  the  owner  cannot  recover 
beyond  the  value  fixed  by  himself  in  the  last  assessment. 

4  The  Paquete  Habana,  175  U.  S,  677.  The  only  pecuniary  limit  in 
appellate  jurisdiction  of  the  Supreme  Court  is  the  limit  of  $1,000  in 
cases  decided  on  appeal  in  the  Circuit  Court  of  the  United  States,  and 
on  which  the  judgment  of  that  court  is  not  made  final,  as  provided  in 
section  6  of  the  Act  of  March  3,  1891. 


§520  MATTERS  OF  PROCEDURE.  697 

Circuit  Court,  whetlier  by  original  suit  therein  or  by  re- 
moval from  the  State  court,  only  attaches  where  the 
amount  in  controversy  "  exceeds,  exclusive  of  interest 
and  costs,  the  sum  or  value  of  $2,000.00.'"  In  a  suit  m- 
volving  the  legality  of  a  tax  the  "  amount  in  controversy  " 
is  the  amount  of  the  tax,  not  the  value  of  the  land  or  the 
property  upon  which  it  is  levied.^  If  the  claim  is  only 
that  the  tax  is  excessive  in  amount,  then  the  alleged  ex- 
cess is  the  amount  in  controversy,  and,  as  will  be  seen, 
the  payment  of  what  is  not  claimed  to  be  excessive  is  re- 
quired as  a  condition  of  litigating  the  excess. 

Separate  and  distinct  assessments  against  different  prop- 
erty owners,  although  made  under  the  same  law  and  in  the 
same  taxing  district,  cannot  be  "  lumped  "  for  the  purpose 
of  o-ivino-  iurisdiction,  but  each  of  such  cases  involves  a 
separate  controversy,  requiring  the  jurisdictional  amount. ^ 

It  therefore  follows  that,  where  the  amount  of  the  tax 
claimed  to  be  illegal  or  excessive  does  not  exceed  $2,000, 
the  Federal  claim  must  be  asserted  in  the  State  court  in 
such  proceeding  as  may  be  authorized  by  the  State,  sub- 
ject to  the  right  of  review  in  the  Supreme  Court  on  writ  of 
error  if  the  Federal  claim  is  denied. 

This  however  only  applies  where  the  validity  of  a  State 
tax  is  involved.  It  is  provided  by  the  United  States  stat- 
utes '^  that  the  Circuit  Courts  are  vested  with  jurisdiction  of 
all  suits  at  law  or  equity  arising  under  any  act  providing 
for  a  revenue  upon  imports  or  tonnage,  irrespective  of  the 
amount.* 

It  is  sufficient  to  state,  in  this  proceeding  in  the  United 


1  Woodman  v.  Ely,  2  Fed.  R.  839. 

2  Woodman  v.  Latimer,  2  Fed.  R.  842;  Linehan  Ry.  Trans.  Co.  v.  Pen- 
dergrass,  16  C.  C.  A.  585;  Ogden  City  v.  Armstrong,  168  U.  S.  224; 
Wheless  v.  St.  Louis,  180  U.  S.  379. 

3  Section  629. 

*  See  Downes  v.  Bidwell,  182  U.  S.  248,  one  of  the  Insular  Cases. 


6j98  matters  of  procedure.  §  521 

States  Circuit  Court,  that  the  taxes  assessed  and  claimed  to 
be  illegal  are  a  specified  sum,  larger  than  the  jurisdictional 
limit,  and  it  is  not  necessary  to  state  how  the  taxes  should 
be. parcelled  out  by  the  State  if  collected.^ 

§  521.  Pleading-  Federal  question  in  United  States  Circuit 
Courts. 

When  the  original  jurisdiction  of  the  United  States  Cir- 
cuit Court  is  invoked  in  a  tax  suit,  on  the  sole  ground  that 
the  controversy  arises  under  the  Constitution  and  laws  of 
the  United  States,  there  being  no  adverse  citizenship,  the 
Federal  question  is  clearly  jurisdictional  and  must  be  dis- 
tinctly pleaded  in  plaintiff's  statement  of  his  cause  of 
action.  In  the  language  of  the  Supreme  Court:  ^  "It  must 
appear,  at  the  outset,  from  the  declaration  or  the  bill  of 
the  party  suing,  that  the  suit  is  of  that  character;  in  other 
words,  it  must  appear,  in  that  class  of  cases,  that  the  suit 
was  one  of  which  the  Circuit  Court,  at  the  time  its  jurisdic- 
tion is  invoked,  could  properly  take  cognizance.  If  it  does 
not  so  appear,  then  the  court,  upon  demurrer,  or  motion, 
or  upon  its  own  inspection  of  the  pleading,  must  dismiss  the 
suit."  3 

It  is  not  sufficient  that  jurisdiction  may  be  inferred  argu- 
mentatively  from  averments  in  the  pleadings,  but  the  aver- 
ments must  be  positive.* 

1  Illinois  Central  R.  R.  Co.  v.  Adams,  180  U.  S.  28. 

2  Colorado  Central  Mining  Co.  v.  Turck,  150  U.  S.  138,  1.  c.  143. 

3  See  also  Borgmeyer  v.  Idler,  159  U.  S.  408. 

*  Hanford  v.  Davies,  163  U.  S.  273,  where  the  court  said,  1.  c.  280:  <'  We 
are  not  required  to  say  that  it  is  essential  to  the  maintenance  of  the  juris- 
diction of  the  Circuit  Court  of  such  a  suit  that  the  pleading  should  refer, 
in  words,  to  the  particular  clause  of  the  Constitution  relied  on  to  sustain 
the  claim  of  immunity  in  question,  but  only  that  the  essential  facts  averred 
must  show,  not  by  inference  or  argumentatively,  but  clearly  and  distinctly, 
that  the  suit  is  one  of  which  the  Circuit  Court  is  entitled  to  take  cogni- 
ance." 


§   522  MATTERS  OF  PROCEDURE.  699 

Even  if  the  jurisdictional  adverse  citizenship  exists,  the 
pleading  of  the  Federal  question  as  a  distinct  ground  of  juris- 
diction is  proper,  as  that  issue  will  warrant  an  appeal  to  the 
Supreme  Court  instead  of  the  Court  of  Appeals.  It  seems 
however  that  the  Supreme  Court,  in  determining  whether 
the  case  is  properly  brought  there  as  involving  a  Federal 
question,  will  look  into  the  opinion  of  the  Circuit  Court, 
not  for  the  purpose  of  ascertaining  the  evidence  or 
the  facts  upon  which  the  judgment  is  based,  but  for  the 
purpose  of  ascertaining  whether  either  party  claimed  in  the 
proper  form  that  the  State  law  was  in  contravention  of  the 
Constitution.^ 

§  522.  Federal  question  and  right  of  removal. 

Under  the  removal  statute,  since  its  amendment  in  1887, 
the  defendant  in  a  State  court  claiming  a  Federal  right  cannot 
remove  the  case  to  the  United  States  court  on  that  ground, 
irrespective  of  adverse  citizenship  in  the  cause,  as  the 
United  States  Circuit  Court  has  no  jurisdiction,  either 
original  or  by  removal,  of  a  suit  arising  under  the  Consti- 
tution, treaties  or  laws  of  the  United  States,  unless  the 
Federal  claim  appears  by  plaintiff's  statement  of  his  cause 
of  action. 2  The  test  of  the  right  to  remove  is  that  it  must 
be  a  case  over  which  the  Circuit  Court  might  have  exercised 
original  jurisdiction  under  Section  1  of  the  act.^  The 
Supreme  Court  has  said  that  the  change  made  from  the 
former  statute  was  in  accordance  with  the  general  policy  of 
the  acts  to  contract  the  jurisdiction  of  the  United  States 
Circuit  Courts. 4 


1  Columbia  Tp.  v.  Loeb,  supra,  §  519.  • 

2  Tennessee  v.  Union  &  Planters'  Bank,  152  U.  S.  454. 

3  See  Section  2  of  the  Act  of  March  3,  1887,  corrected  by  the  Act  of 
August  13,  1888;  Arkansas  v.  Kansas  &  Texas  Coal  Co.,  183  U.  S.  185. 

*  The  case  of  Southern  Pac.  Ry.  Co.  v.  California,  118  U.  S.  109,  was 
decided  under  the  former  statute. 


700  MATTERS  OF  PROCEDURE.  '  §  523 

It  is  not  sufficient  for  the  plaintiff's  appeal  to  contain  a 
suof2'estion,  that  the  defendants  will  contend  that  the  law 
under  which  the  plaintiff  claims  is  void  as  violative  of  the 
Constitution  of  the  United  States.  The  suggestion  of  one 
party,  that  the  other  will  or  may  set  up  a  claim  under  the 
Constitution  or  laws  of  the  United  States,  does  not  make 
the  suit  one  arising  under  the  Federal  Constitution  or  laws. 
Neither  can  resort  be  had  to  judicial  knowledge  to  raise 
controversies  not  presented  in  the  pleadings.!  But  in  such 
case  the  defendant,  who  has  a  Federal  claim,  is  not  without 
remedy,  for,  if  he  pleads  and  relies  on  such  claim  as  a  de- 
fense in  the  State  court  and  that  court  decides  against  him, 
he  can  avail  himself  of  the  other  method  of  procedure 
and  carry  the  case  by  writ  of  error  to  the  United  States 
Supreme  Court. ^ 

§  523.  Federal  question  on  writ  of  error  to  State  court. 

Whenever  the  Federal  question  is  the  basis  of  the  juris- 
diction, it  should  be  distinctl}^  pleaded,  and,  in  a  review  of 
the  decision  of  the  State  court  by  writ  of  error  in  the  Su- 
preme Court,  it  must  appear  from  the  record  that  the 
Federal  question  was  raised  and  adversely  decided  by  the 
State  court.  This  adverse  decision  must  be  necessary  to  a 
complete  adjudication  of  the  controversy  and  decisive  of 
the  case.  The  statute  requires  that  the  Federal  right  must 
be  distinctly  ' '  set  up  or  claimed. ' '  The  jurisdiction  cannot 
be  sustained  by  mere  inference,  but  only  by  averment  so 
distinct  and  positive  as  to  place  it  bej^ond  question  that  the 
party  bringing  the  case  from  the  State  court  intended  there 
to  assert  the  Federal  right. ^ 

i  Mountain  View  Mining  &  Milling  Co.  v.  McFadden,  180  U.  S.  533. 

2  Railroad  Co.  v.  Mississippi,  102  U.  S.  135,  144. 

3  Oxley  Stave  Co.  v.  Butler  County,  166  U.  S.  649;  Cliicago  &  N.  W. 
Ry.  Co.  V.  Cliicago,  164  U.  S.  454;  Micliigan  Sugar  Co.  y.  Michigan, 
185  U.  S.  112. 


§  523  MATTERS  OF  PROCEDURE.  701 

The  jurisdiction  of  the  Supreme  Court  however  depends, 
not  so  much  upon  the  form  of  tlie  statement  of  the  claim 
in  the  State  court,  as  upon  the  fact  that  the  State  court 
considered  and  decided  a  Federal  question.  Thus,  in  a 
case  where  the  opinion  of  the  State  court  did  not  consider 
Federal  questions,  but  did  construe  and  decide  them  in 
overruling  a  motion  for  rehearing,  the  Supreme  Court  held 
that  there  was  sufficient  to  give  jurisdiction  on  the  writ  of 
error,  distino-uishino;  this  case  from  one  where  the  court 
overruled  the  motion  for  rehearing,  which  set  up  for  the 
first  time  the  Federal  question,  without  passing  upon  the 
Federal  question.^  It  is  also  sufficient  to  sustain  the  juris- 
diction of  the  Supreme  Court,  though  the  allegations  assert- 
ing the  Federal  right  are  general  and  even  ambiguous, 
provided  they  are  treated  as  sufficient  by  the  State  court ;  ^ 
and,  in  condemnation  cases  where  no  formal  answer  is  re- 
quired, the  Federal  claim  may  be  set  up  by  written  motion 
to  set  aside  the  verdict.^  Thus,  in  a  recent  case,  the  Su- 
preme Court  said :  "If  the  State  court  in  deciding  the  case 
has  actually  considered  and  determined  a  Federal  question, 
although  arising  on  ambiguous  averments,  then  a  Federal 
controversy  having  been  actually  decided  the  right  of  this 
court  to  review  obtains.  All  that  is  essential  is  that  the 
Federal  questions  must  be  presented  in  the  State  court  in 
such  a  manner  as  to  bring  them  to  the  attention  of  that 
tribunal.  And,  of  course,  where  it  is  shown  by  the  record 
that  the  State  court  considered  and  decided  the  Federal 
question,  the  purpose  of  the  statute  is  subserved."  ^ 

If  the  judgment  of  the  State  court  can  be  affirmed  on 
other  grounds  broad  enough  to  sustain  it,  without  deciding 
the  Federal  question,  there  is  no  basis  for  the  jurisdiction 

1  Mallett  V.  North  Carolina,  181  U.  S.  589. 
•■^  M,  K.  &  T.  R.  R.  Co.  Elliott,  184  U.  S.  530,  532. 
3  C.  B.   &  Q.  R.  Co.  V.  Chicago,  166  U.  S.  222,  231. 
i  M.  K.  &T.  R.  R.  Co.  V.  Elliott,  184  U.  S.  53C. 


702  MATTERS  OF  PROCEDURE.  §  524 

of  the  Federal  court,  which  extends,  not  to  the  case,  but 
to  the  Federal  question  controlling  the  case,  and  the  writ 
of  error  will  therefore  be  dismissed.^  The  Federal  ques- 
tion is  not  sufficiently  established,  as  having  been  set  up 
or  claimed  in  the  State  court,  when  the  specific  question 
does  not  appear  in  the  record.^  The  court  said  in  the  case 
cited  that  it  was  not  required  to  search  the  statutes  of  Mis- 
sissippi to  find  one  which  could  be  construed  as  impairing 
the  obligation  of  the  contract. 

The  fact  that  the  State  court,  while  deciding  the  Federal 
question,  erroneously  holds  that  it  is  not  a  Federal  question 
does  not  take  the  case  out  of  the  rule  that,  where  a  Fed- 
eral question  has  been  decided  below,  jurisdiction  exists  to 
review.^  The  court  said  that  the  result  of  the  contrary 
doctrine  would  be  that  no  case,  where  the  question  of  a 
Federal  right  had  been  actually  decided,  could  be  reviewed 
in  the  Supreme  Court,  if  the  State  court,  in  passing  upon 
the  question,  had  also  decided  that  it  was  non-Federal  in 
its  character.  But  if  the  record  shows  that  the  State 
court  did  nothing  more  than  decline  to  pass  upon  the 
Federal  question,  because,  under  the  State  practice,  it  was 
not  properly  brought  to  the  attention  of  the  trial  court,  there 
is  no  Federal  question  whereon  to  base  the  jurisdiction  of 
the  Supreme  Court.* 

§  524.   Questions  of  fact  not  considered  on  writ  of  error 
to  State  court. 

On  writ  of  error  to  the  State  court,  it  is  immaterial 
whether  the  suit  is  an  action  at  law  or  in  chancery.  In 
either  case,  when  the  facts  are  found  by  the  State  court, 

1  Rutland  R.  R.  Co.  v.  Cen.  Vt.  R.  Co.,  159  U.  S.  630  and  cases 
cited. 

2  Yazoo  &  Miss.  Valley  R.  Co.  v.  Adams,  180  U.  S.  41. 

3  M.  K.  &T.  R.  R.  Co.  V.  Elliott,  sxipra;  Carter  v.  Texas,  177  U.  S.- 
442. 

*  Erie  Railroad  Co.  u.  Purdy,  185  U.  S.  148. 


§  525  MATTERS  OF  PROCEDURE.  703 

the  Supreme  Court  is  controlled  by  such  finding.  If  these 
questions  of  fact  are  adequate  to  determine  the  controversy 
and  broad  enough  to  maintain  the  judgment,  i|^ependent 
of  any  Federal  question,  the  Supreme  Court  is  without 
jurisdiction,  although  the  State  court  may  also  have  deter- 
mined the  Federal  question. ^  When  the  question  decided 
by  the  State  court  is  not  merely  of  the  weight  or  sufficiency 
of  the  evidence  to  prove  a  fact,  but  is  of  the  competency 
and  legal  effect  of  the  evidence  as  relating  to  a  question  of 
Federal  law,  the  decision  may  be  reviewed  by  the  Supreme 
Court  on  writ  of  error. ^ 

§  525.  Writ   of  error    is  to   highest  State    court    having 
jurisdiction. 

The  writ  of  error  from  the  Supreme  Court,  under  Sec.  709, 
E.  S.,  U.  S.,  is  not  necessarily  to  the  highest  court  of  the 
State,  but  to  "the  highest  court  of  a  State  in  which  a 
decision  of  the  suit  can  be  had."  It  is  therefore  imma- 
terial how  the  appellate  jurisdiction  under  the  State  judicial 
system  is  distributed,  the  writ  of  error  goes  to  whatever 
court  of  the  State  has  the  final  jurisdiction  in  that  case,  and 
the  decision  of  the  State  court  as  to  what  court  has  final 
jurisdiction  is  conclusive.  If  the  case  is  not  appealable,  and 
the  trial  court  is  the  court  of  final  jurisdiction,  then  the 
Avrit  goes  to  that  court.  The  judgment  however  must  be 
final  and  dispose  of  the  case.  A  judgment  reversing  and 
remanding  a  cause  for  another  trial  is  not  a  final  judgment, 
though  a  decision  of  an  appellate  court  of  last  resort, 
reversing  and  remanding  a  cause,  and  directing  the  specific 
judgment  to  be  entered  by  the  lower  court,  is  a  final  judg- 
ment within  the  meaning  of  the  Judiciary  Act. 


1  Egan  V.  Clark,  1G5  U.  S.  188. 

2  Dower  u.  Richards,  151  U.  S.  658. 


704  MATTERS  OF  PROCEDURE.  §  526 

§  526.  Practical  considerations  in  selection  of  procedure. 

Assumino;  tliat  the  tax  litigant  has  a  choice  of  original 
forums,  in  that  the  tax  in  dispute  is  of  the  jurisdictional 
amount  required  for  suit  in  the  United  States  Circuit  Court, 
there  are  eventualities,  not  to  be  overlooked,  which  grow 
out  of  the  exercise  of  concurrent  jurisdiction  by  the  courts  of 
distinct  sovereignties,  and  the  limited  appellate  jurisdiction 
of  the  Supreme  Court  over  courts  of  the  State.  Thus,  if 
the  original  concurrent  jurisdiction  of  the  United  States 
Circuit  Court  is  invoked,  there  being  the  necessary  amount 
in  controversy,  whether  the  jurisdiction  is  based  on  adverse 
citizenship  or  on  a  cause  arising  under  the  Constitution, 
laws  or  treaties  of  the  United  States,  the  court  has  juris- 
diction not  merely  of  the  Federal  question  involved,  but  of 
the  entire  cause  concurrent  with  the  State  courts.  In  such 
a  case  the  United  States  Circuit  Court,  and  the  Court  of 
Appeals  or  Supreme  Court,  in  the  exercise  of  their  appellate 
jurisdiction,  will  construe  for  themselves  the  State  consti- 
tution and  statutes,  if  there  is  any  question  in  the  case 
requiring  such  construction.  It  is  true  that  as  a  rule  the 
Federal  courts  follow  the  State  courts  in  such  construction ; 
but  it  is  not  an  infrequent  occurrence  that  the  Federal  court 
is  required  to  construe  the  State  law  without  the  assistance 
of  a  prior  or  authoritative e  construction  by  the  State  court, 
and  in  such  case  the  court  must  exercise  its  own  judgment 
upon  general  principles  of  constitutional  law.i  Tlius  it 
may  well  happen  that  a  case  may  be  decided  one  way  by 
the  United  States  Circuit  Court,  when  the  State  court 
would  have  rendered  a  different  decision,  which,  being 
the  judgment  of  the  State  court  on  a  question  of  State 
law,  could  not  have  been  reversed  by  the  Federal  court. 

On  the  other  hand,  there  have  been  several  cases  where 
the   claim  of  the    invalidity  of  a  State  tax,  as  violative  of 

1  See  remarks  of  Miller,  J.,  in  Davidson  v.  New  Orleans,  96  U.  S.  97. 


§  527  MATTERS  OF  PROCEDURE.  705 

Federal  law,  has  been  sustained  in  the  highest  State  court, 
and  this  judgment,  being  in  favor  of  the  Federal  claim, 
is  final,  so  that  it  cannot  be  reviewed  by  writ  of  error  in 
the  Supreme  Court.  In  view  of  the  indisposition  of  the 
latter  court  to  overturn  the  tax  systems  of  the  States  and 
its  liberal  construction  of  the  State  power  of  classification 
in  taxation,  a  tax  may  be  declared  void  by  the  State  court 
as  \aolative  of  Federal  law,  when  it  would  have  been  held 
valid  by  the  Federal  court,  had  its  jurisdiction  been 
invoked. 

This  may  be  illustrated  by  the  decisions  of  the  Supreme 
Court  and  some  of  the  State  courts  as  to  the  power  of  the 
State  to  make  progressive  rates  of  inheritance  taxation.! 
A  still  more  notable  illustration  is  the  decision  of  the 
Supreme  Court  of  Missouri  holding  invahd,  as  violative  of 
the  "  equal  protection  of  the  laws  "  under  the  Fourteenth 
Amendment,  the  constitutional  amendment  taxing  mort- 
gages  as  interests  in  the  property  mortgaged  and  excepting 
railroad  mortgages  from  its  operation. 2  This  (decision  by 
a  State  court  construing  and  applj  ing  the  Federal  Consti- 
tution was  final.  While  the  result  was  doubtless  fortunate 
for  the  State,  it  is  by  no  means  clear,  in  view  of  the 
liberal  construction  by  the  Supreme  Court  of  the  State 
power  of  classification  in  taxation,  that  the  same  result 
would  have  been  reached,  if  the  suit  had  been  brought 
originally  in  the  Federal  court. 

§  527.  Jurisdiction  over  case  and   over  Federal  question 
distinguished. 

When  the  Supreme  Court  takes  jurisdiction  on  appeal 
from,  or  writ  of  error  to,  the  United  States  Circuit  Court,  on 
the  ground  that  a  Federal  question  is   involved  in  the  case, 

1  See  Chapter  XV. 

2  Russell  V.  Croy,  164  Mo.  69. 

45 


706  MATTERS  OF  PROCEDURE.  §  528 

it  takes  jurisdiction  of  and  decides  the  whole  case  and  all 
the  questions  involved  therein,  and  not  merely  the  Federal 
question  to  which  its  jurisdiction  is  limited  under  writs  of 
error  to  the  State  courts.  If  the  case  involves  therefore 
not  merely  a  Federal  question,  but  also  questions  of  general 
law,  whereon  the  Federal  courts  do  not  as  of  course  follow 
the  decisions  of  the  State  courts,  the  judgment  of  the 
Supreme  Court  through  this  procedure  may  be  secured 
upon  the  whole  case  and  not  merely  upon  the  Federal 
question.  On  the  other  hand,  in  the  review  of  the  decisions 
of  the  State  courts,  the  jurisdiction  of  the  Supreme  Court 
is  based  upon  and  limited  to  the  Federal  question,  which  is 
involved  in  and  decisive  of  the  case.^ 

§  528.  What  is  Federal  question  in  taxation. 

A  Federal  question  in  taxation  is  clearly  raised,  when  it 
is  claimed  that  the  tax  law  as  construed  and  enforced  by 
the  State  impairs  a  right,  privilege  or  exemption  enjoyed 
under  or  protected  by  the  Constitution,  laws  or  treaties  of 
the  United  States. ^  There  is  no  Federal  question  involved 
in  the  claim  that  a  State  statute  is  not  sufficiently  definite ^ 
and  certain  in  its  character,  so  that  the  amount  of  tax 
to  be  paid  can  be  ascertained.  The  decision  of  the  State 
court  as  to  the  proper  construction  and  sufficiency  of  the 
statute  is  conclusive. 

Neither  is  there  any  Federal  question  involved  in  a 
decision  of  a  State  court  that  assessors,  in  the  absence  of 
fraud  or  intentional  wrong,  are  not  personally  liable  for 

1  See  remarks  of  Justice  Miller  in  Davidson  v.  New  Orleans,  96  U.  S. 
97;  also  Central  Land  Co.  v.  Laidley,  159  U.  S.  103.  For  illustrations  of 
botli  forms  of  procedure,  see  Huntington  v.  Worthen,  120  U.  S.  97,  supra, 
§  432;  Little  Rock  &  Ft.  Smith  Ry.  Co.  v.  Same,  120  U.  S.  97;  Swofford  v. 
Templeton,  185U.  S.  487.      • 

2  For  cases  involving  alleged  impairment  of  the  obligation  of  con- 
tracts, where  the  Supreme  Court  construes  the  State  law  and  determines 
for  itself  the  existence  of  the  contract,  see  supra,  §  58. 


§529  MATTERS  OF  PROCEDURE.  707 


error  in  the  assessment.!  The  Supreme  Court  said  that, 
whether  the  State  court  decided  the  question  correctly  or 
not,  iLis  not  a  Federal  question,  but  one  of  general  munici- 
pal iSv  to  be  governed  either  by  the  statute  law  or  the 
common  law  of  the  State. 

There  is  no  Federal  question  involved  in  a  suit  between 
the  lessor  and  lessee  of  a  railroad,  where  the  lessee  has  paid 
a  tax  and  deducted  it  from  the  rent,  and  was  sued  by  the 
lessor  for  the  amount  of  deduction  on  the  ground  that  the 
tax  was  illegal  as  an  attempted  regulation  of  commerce. 
The  State  court  held  that,  independently  of  this  question 
of  constitutionality  of  the  tax,  it  was  the  duty  of  the  lessor 
to  pay  the  tax,  that,  since  the  lessee  had  been  compelled  to 
pay  it,  the  law  implied  a  promise  to  repay  the  lessee,  and 
that  the  latter  was  under  no  obhgation  to  test  the  constitu- 
tionality of  the  tax.  The  Supreme  court  held  that  it  had 
no  jurisdiction  to  review  the  judgment. 2 

§  529.  Federal  right  must  be  set  up  in   adversary   pro- 
ceeding. 

To  give  the  Supreme  Court  jurisdiction  by  writ  of  error 
to  the  State  court,  this  claim  of  Federal  right  must  be 
raised  in  an  adversary  proceeding  where  there  are  opposing 
parties,  and  wherein  the  court  can  render  a  binding  adjudi- 
cation. This  was  illustrated  in  a  case  from  California,^ 
where  the  statute  authorized  the  board  of  directors  of  an 
irrio-ation  district  ^  to  commence  proceedings  in  a  court  of 
the  State  asking  determination  of  the  validity  of  the  bonds 
it  was  about  to  issue.     A  resident  of  the  district  appeared 

1  Williams  v.  Weaver,  100  U.  S.  547,  see  also  Tyler  v.  Cass  Co.,  142 
U.  S.  288. 

2  Rutland  R.  R.  Co.  v.  Central  Vt.  R.  R.,  159  U.  S.  630. 

3  Tregea  v.  Modesto  Irrigation  District,  164  U.  S.  179. 

*  Under  tlie  statute  declared  valid  in  Fallbrook  Irrigation  District  v. 
Bradley,  supra,  §  362. 


7X)8  MATTERS  OF  PROCEDURE.  §   530 

and  claimed  that  the  issue  of  the  bonds  would  deprive  him 
of  his  property  "  without  due  process  of  law."  The  Su- 
preme Court  held  that  the  judgment  of  the  State  court 
holding  the  bonds  valid  was  not  subject  to  review  on  writ 
of  error.  The  proceeding  was  one  in  effect  to  secure 
evidence,  a  mere  ex  parte  case  to  obtain  a  judicial  opinion, 
upon  which  the  parties  might  base  further  action.  It  said, 
1.  c.  189:  "The  State  may  determine  for  itself  in  what 
way  it  will  secure  evidence  of  the  regularity  of  the  pro- 
ceedings of  any  of  its  municipal  corporations,  and  unless 
in  the  course  of  such  proceeding  some  constitutional  right  is 
denied  to  the  individual,  this  court  cannot  interfere  on  the 
ground  that  the  evidence  may  thereafter  be  used  in  some 
further  action  in  which  there  are  adversary  claims.  So  on 
this  ground,  and  not  because  no  Federal  question  was  in- 
sisted upon  in  the  State  court,  the  writ  of  error  will  be 
dismissed."  i 

§  530.  Injunction  against  taxation  in  Federal  courts. 

The  remedy  by  injunction  against  illegal  taxation  is 
obviously  the  speediest,  and  frequently  is  the  only,  effect- 
ive remedy.  But  the  rule  is  well  established  in  the  Fed- 
eral courts  and  generally  in  the  State  courts  that  a  tax  will 
not  be  enjoined  solely  on  the  ground  of  unconstitutionality. 
The  general  rule  that  relief  iu  equity  can  only  be  sought 
in  the  absence  of  an  adequate  remedy  at  law  is  reinforced 
in  the  Federal  courts  by  the  provision  of  the  United  States 
statute. 2     Although  this  statute  is  only  declaratory  of  what 

1  Justices  Harlan,  Gray  and  Brown  dissented,  holding  that  the  payment 
would  conclude  all  the  taxpayers  in  the  district,  and  that  it  was  therefore 
the  duty  of  the  court  to  consider  the  case  on  the  merits,  but  that  the 
judgment  should  benfQrraed  under  the  principles  announced  in  Fallbrook 
Irrigation  Dist.  v.  Bradley,  supra. 

2  Sec.  723  R.  S.  U.  S. :  "Suits  iu  equity  shall  not  be  sustained  in 
either  of  the  courts  of  the  United  States  in  any  case  where  a  plain, 
adequate  and  complete  remedy  may  be  had  at  law." 


§  530  MATTERS  OF  PROCEDURE.  709 

was  always  the  law,  "  it  must,  at  least,"  said  the  Supreme 
Court-"  have  been  intended  to  emphasize  the  rule,  and  to 
impr^s  it  upon  the  attention  of  the  courts."  i 

It  is  also  provided,  by  another  section  of  the  United 
States  statutes, 2  that  the  writ  of  injunction  shall  not  issue 
against  any  State  court  except  in  relation  to  bankruptcy 
proceedings. 3  The  rule  is  also  emphasized  by  still  another 
provision  of  the  statutes*  that  "  no  suit  for  the  purpose 
of  restraining  the  assessment  or  collection  of  any  tax  shall 
be  maintained  in  any  court."  This  last  statute  however 
applies  only  to  taxes  levied  by  the  United  States,  and  is  to 
be  considered  in  connection  with  the  provisions  of  the  In- 
.  ternal  Revenue  Law,^  providing  for  payment  of  taxes 
under  protest,  and  regulating  suits"  for  recovery  against 
collectors. 

It  was  said  however  by  Justice  Miller  with  reference  to 
this  last  provision :  ^  "  Though  this  was  intended  to  apply 
alone  to  taxes  levied  by  the  United  States,  it  shows  the 
sense  of  Congress  of  the  evils  to  be  feared,  if  courts  of 
justice  could  in  any  case,  interfere  with  the  process  of  col- 
lecting the  taxes  on  which  the  government  depends  for  its 
continual  existence.  It  is  a  wise  policy.  It  is  founded  in 
the  simple  philosophy  derived  from  the  experience  of  aoes, 
that  the  payment  of  taxes  has  to  be  enforced  by  summary 
and  stringent  means  against  a  reluctant  and  often  adverse 

1  New  York  Guaranty  Co.  v.  Memphis  Water  Co.,  107  U.  S.  205,  1.  c. 
214;  Buzard  v.  Houston,  119  U.  S.  347. 

2  Sec.  720.  "  The  writ  of  injunction  shall  not  be  granted  by  any 
court  of  the  United  States  to  stay  proceedings  in  any  court  of  a  State, 
except  in  cases  where  such  injunction  may  be  authorized  by  any  law 
relating  to  proceedings  in  bankruptcy." 

3  See  Moore  v.  Halliday,  4  Dillon  52,  where  an  injunction  was  al- 
lowed against  county  officers,  but  denied  against  the  prosecution  of 
pending  suits  for  collection  of  taxes. 

4  Sec.  3224  E.  S.  U.  S. 

*  Sees.  3226-8  R.  S.  U.  S. 

6  In  State  Railroad  Tax  Cases,  92  U.  S.,  p.  613. 


710  MATTERS  OF  PROCEDURE.  §  531 

sentiment ;  and  to  do  this  successfully,  other  instrumentali- 
ties and  other  modes  of  procedure  are  necessary,  than  those 
which  belong  to  courts  of  justice." 

§  531.  Want  of  adequate  remedy  at  law  must  be  shown. 

It  is  therefore  required  that  a  party  asking  an  injunction 
in  a  Federal  court  against  a  State  must  show  by  proper 
averment  that  he  has  not  "  a  plain,  adequate  and  complete 
remedy  at  law."  The  mere  assertion  of  unconstitution- 
ality or  illegality  of  a  tax  is  not  enough.  "  There  must  be 
an  allegation  of  fraud ;  that  it  creates  a  cloud  upon  the 
title ;  that  there  is  apprehension  of  multiplicity  of  suits,  or 
some  cause  presenting  a  case  of  equity  jurisdiction."  ^ 

This  principle  has  been  applied  b}^  the  Supreme  Court  in 
several  tax  cases. ^  Where  the  plaintiff  alleges  that  he  is 
threatened  with  irreparable  injury,  the  facts  constituting 
such  injury  must  be  stated.  In  Shelton  v.  Piatt,  the  court 
said  that,  while  an  unconstitutional  tax  may  confer  no  right 
and  support  no  obligation,  the  trespass  resulting  from  pro- 
ceedings to  collect  such  void  tax  cannot  be  restrained  by 
injunction,  where  irreparable  injury  or  other  ground  for 
equitable  interposition  is  not  shown  to  exist. 

It  is  not  necessary  that  the  objection  of  "  adequate  rem- 
edy at  law  ' '  should  be  raised  by  the  pleadings  or  suggested 
by  counsel;  but  the  Supreme  Court  will,  sua  sponte, 
recognize  the  fact  in  examining  the  proofs  and  give  it 
effect.^ 


1  Hannewinkle  v.  Georgetown,  1.5  "Wall.  548. 

2  Dows  V.  Chicago,  11  Wall.  108;  Shelton  v.  Piatt,  139  U.  S.  591; 
Allen  V.  Pullman  Car  Co.,  139  U.  S.  658;  Arkansas  B.  &  L.  Ass'n  v. 
Madden,  175  U.  S.  269;  Pittsburgh,  etc.,  Ry.  Co.  v.  Board  of  Public 
Works,  172  U.  S.  32. 

3  Allen  V.  P.  Car  Co.,  siipra.  It  should  be  observed  that  in  this  and 
other  Tennessee  cases,  the  court  commented  on  the  fact  that  the  State 
statute  gave  an  adequate  remedy  by  authorizing  payment  under  pro- 
test and  suit  to  recover,  c.  44,  p.  71,  Laws  of  Tenn.  1873. 


§532  .  MATTERS  OF  PROCEDURE.  711 

There  is  no  right  to  enjoin  the  collection  of  a  tax  after 
it  h^  been  paid,  though  under  protest.  The  Supreme 
Couif  said  that  the  remedy  in  such  case  is  by  action  at 
law,  as  the  only  equitable  ground  of  relief  ceases  with  the 
payment  of  the  tax,  whether  voluntary  or  compulsory.^ 

§  532.  Injunction  often  only  proper  remedy. 

But  the  preventive  remedy  to  be  obtained  in  a  court  of 
equity  not  only  may  be  a  proper  remedy  in  cases  of  illegal 
taxation,  but  is  often  the  only  proper  remedy.  Thus,  in 
the  litigation  involving  the  taxation  of  national  bank  stock- 
holders, the  remedy  by  injunction  was  held  to  be  the 
proper  remedy  of  shareholders,  or  of  the  bank  suing  in 
their  behalf  .2  This  was  because  the  claim  of  deduction 
for  debts  must  be  made  a  reasonable  length  of  time  before 
the  assessment  roll  is  made  up,  and  a  party  therefore 
should  proceed  promptly  if  his  claim  is  denied,  by  resort- 
ing to  a  court  of  equity  "  to  enjoin  the  collection  of  the 
illegal  excess,  upon  the  payment  or  tender  of  the  amount 
due  upon  what  was  admitted  as  a  just  valuation." 

The  same  consideration  applies  in  cases  of  special  taxa- 
tion for  street  improvements,  where  a  party,  who  waits 
until  the  improvement  is  completed  before  asserting  his 
objection,  may  be  held  to  be  estopped  from  asserting  such 
claim,  when  the  rights  of  others  would  be  prejudiced 
thereby. 3  This  is  under  the  equitable  principle  that  "  he 
who  does  not  speak  when  he  ought  to  speak,  will  not  be 
allowed  to  speak  when  he  would  speak." 

The  threatened  destruction  or  interruption  of  business, 

1  Singer  Manufacturing  Co.  v.  Wright,  141  U.  S.  696,  following  Little 
V.  Bowers,  134  U.  S,  547. 

2  Hills  V.  Exchange  Bank,  105  U.  S.  319;  Stanley  v.  Supervisors,  121 
U.  S.  535;  Williams  V.  Supei-visors,  122  U.  S.  154;  butsee  People's  Nat. 
Bank  v.  Marye,  107  Fed.  Rep.  571. 

3  Heraan  v.  King,  85  Mo.  App.  231. 


712  MATTERS  OF  PROCEDURE.  §  532 

through  seizure  of  property  for  failure  to  pay  a  license 
claimed  to  be  illegal,  has  been  held  "to  constitute  irre- 
parable injury  warranting  an  injunction,"^  there  being  no 
adequate  remedy  at  law. 

The  prevention  of  multiplicity  of  suits  is  a  recognized 
ground  of  equitable  interference,  but  the  jurisdiction  on 
this  ground  can  only  be  invoked  when  the  threatened  suits 
are  against  the  same  person.^ 

It  is  obvious  also  that  public  policy  often  requires  a  speedj'^ 
determination  of  the  validity  of  a  tax.  If  it  is  invalid, 
other  provisions  can  be  made  for  public  needs,  and  uncer- 
tainty and  delay  avoided.  In  cases  of  alleged  discrimina- 
tion in  valuation  and  consequent  excessive  taxation,  it  is  to 
the  interest  of  both  the  taxpayer  and  the  public  that  the 
controversy  should  be  promptly  determined.  It  is  for  this 
reason  that  we  frequently  see  cases  made  up  and  advanced 
by  waiver  of  customary  procedure,  for  the  express  purpose 
of  avoiding  the  public  and  private  embarrassments  arising 
from  delay  and  uncertainty.^ 

In  a  national  bank  case  from  Louisiana,  where  a  money 
judgment  was  recovered  by  the  bank  against  an  assessor  for 
alleged  discrimination,  the  Supreme  Court  reversed  the 
case*  on  the  ground  that  the  demurrer  that  relief  should 
have  been  sought  in  equity,  not  in  law,  should  have  been 
sustained.  The  court  said  that  the  legal  remedy  in  this 
case  was  inadequate  and  incongruous,  and  that  it  was  imma- 
terial that  the  laws  of  Louisiana  secured  to  taxpayers  the 
right  of  testing  the  justice  of  assessments  before  courts  of 
justice  in  any  procedure  that  the  Constitution  and  laws  per- 
mitted.    The  adoption  by  the  Federal  courts  of  the  State 

1  Minneapolis  Brewing  Co.  v.  McGillivray,  104  Fed.  Rop.  258.  See  also 
Southern  Ry.  Co.  v.  Asheville,  69  Fed.  Rep.  35'J. 

2  People's  Nat.  Bank  v.  Marye,  107  Fed.  Eep.  571. 

3  See  infra,  Sec.  551. 

4  Lindsay  v.  Shreveport  Bank,  156  U.  S.  485. 


§  534  MATTERS  OF  PROCEDUEE.  713 

practice  must  not  be  understood  as  authorizing  legal  and 
equitable  claims  to  be  blended  in  one  suit. 

§  533.  Procedure  in  Income  Tax  Cases. 

This  view  of  public  policy,  as  demanding  a  prompt  deter- 
mination of  the  validity  of  a  tax,  was  forcibly  illustrated 
in  the  Income  Tax  Cases.  The  decision  that  the  tax  was 
invalid  was  rendered  in  a  suit  brought  by  a  Massachusetts 
stockholder  in  a  New  York  Trust  Company  to  enjoin  the 
corporation  from  paying  a  tax  alleged  to  be  illegal.  The 
bill  also  contained  allegations  of  threatened  irreparable  in- 
jury, and  of  ineffectual  demand  upon  the  corporation  to 
refrain. 1  The  objection  of  adequate  remedy  at  law  was  not 
raised,  nor  was  the  statute  prohibiting  injunctions  against 
the  collection  of  taxes  levied  by  Congress,  siqjra,  §  530, 
invoked. 2  The  Chief  Justice  in  his  opinion^  said  on  this 
point :  — 

"The  objection  of  adequate  remedy  at  law  was  not 
raised  below,  nor  is  it  now  raised  by  appellees,  if  it  could 
be  entertained  at  all  at  this  stage  of  the  proceedings ;  and 
so  far  as  it  was  within  the  power  of  the  government  to  do 
so,  the  question  of  jurisdiction,  for  the  purposes  of  the  case, 
was  explicitly  waived  on  the  argument.  The  relief  sought 
was  in  respect  of  voluntary  action  by  the  defendant  com-  • 
pany,  and  not  in  respect  of  the  assessment  and  collection 
themselves.  Under  these  circumstances,  we  should  not  be 
justified  in  declining  to  proceed  to  judgment  upon  the 
merits." 

§  534.  Habeas  corpus  as  remedy  for  illegal  taxation. 

The  collection  of  license,  privilege  and  other  occupation 
taxes  is  usually  enforced  by  criminal  prosecutions,  with  a 

1  See  Hanes  v.  Oakland,  104  U.  S.  450. 

2  See  dissenting  opinion  of  Justice  White,  157  U.  S.  608. 

3  157  U.  S.  1.  c.  554. 


714  MATTERS  OF  PROCEDURE.  §  534 

penalty  of  fine  or  imprisonment  for  prosecuting  the  busi- 
ness without  a  license.     Where  the  latter  penalty  is  im- 
posed, the  United  States  Circuit  Courts  have  in  a  number 
of  cases  on  writ  of  habeas  corpus  released  the  party  from 
prison,  on  the  ground  that  such  imprisonment  was  in  viola- 
tion of  the  Constitution  and  laws  of  the  United  States,  that 
being  a  ground  for  the  issue  of  the  writ  by  the  Federal  courts 
under  the  United  States  statutes.^      But  the  rule  is  now  es- 
tablished in  the  Federal  courts  that  this  writ  cannot   be 
used  to  perform  the  office  of  a  Avrit  of  error  or  of  an  appeal. 
It  is  the  settled  and  proper  procedure,  said  the  court  in  a 
recent  case,'-*  that  this  writ  should  not  be  issued,  where  the 
petitioner  is  imprisoned  for  violation  of  a  State  law,  unless 
in  cases  of  peculiar  urgency ;  that  instead  of  discharging  they 
will  leave  the  prisoner  to  be  dealt  with  by  the  courts  of  the 
State,  and  that,  after  a  final  determination  of  the  case  by 
the  State  court,  th6  Federal  courts  will  even  then  generally 
leave  the  petitioner  to  his  remedy  by  writ  of  error  from  the 
Supreme  Court.     The  reason  for  this  rule  of  procedure  is 
that  the  jurisdiction  given  to  the    Federal  courts   to    dis- 
charge, on  writ  of  habeas  corpus,  the  prisoner  of  the  State 
is  exceedingly  delicate,  and  it  therefore  should  not  be  exer- 
cised, unless  the  circumstances  are  of  an  exceptional  nature. 
It  was  said  however  that  a  different  question  would  be  pre- 
sented, if  a  party  were  compelled  to  submit  to  imprison- 
ment notwithstanding  an  appeal  or  writ  of  error,  before  the 
final  determination  of  the  case  upon  the  appeal. ^ 


1  Section  753,  R.  S.  U.  S.  In  Asher  v.  Texas,  128  U.  S.  129,  the  plain- 
tiff in  a  writ  of  habeas  corpus  was  ordered  disciiarged  by  tiie  United 
States  court  on  tliis  ground,  and  tlie  judgment  of  the  State  Supreme 
Court,  denying  the  writ,  was  reversed. 

2  Baker  v.  Grice,  169  U.  S.  284.    See  also  In  re  Swan,  150  U.  S.  637. 

3  See  paper  by  Seymour  D.  Thompson,  Am.  Bar  Assn.,  1883,  on, 
"  Abuses  of  Habeas  Corpus." 


§  535  MATTERS  OF  PROCEDURE.  715 

§  SSo.Jnjuiiction  only  allowed  on  payment  of  taxes  ac- 
"    tually  due. 

In  the  State  Railroad  Tax  Cases  ,i  the  rule  was  established 
in  the  practice  of  the  Federal  courts,    that  an  injunction  to 
stay  'the    collection  of  taxes  will  not  be  granted,  until  the 
plaintiff   has  first  paid  the  part  of  the  tax  conceded  to  be 
due,  or  which  can  be  seen  to  be  due  on  the  face  of  the  bill, 
or  which  can  be  shown  by  affidavits  to  be  due,  whether  con- 
ceded to   be  due  or  not.     The  court  said  that  the  State  is 
not  to  be  tied  up,  as  to  that  of  which  there  is  no  contest, 
by   lumping   this  uncontested  amount  with  that^which  is 
really  contested.     If  the  proper  officer  refuses  to  receive  a 
part  of  the  tax,  it  must  be  tendered  and  tendered  without 
the    condition  annexed  of  a  receipt  in  full  for  all  the  taxes 
assessed.     This  was   laid   down   as    a   rule  to  govern  the 
courts    of   the  United  States  in  such  cases,  and  in  the  sub- 
sequent cases  cited  this  rule  has  been  affirmed,  and  the  fail- 
ure  to   make    such  payment   or   tender  treated  as  a  fatal 
objection   to    the   bill. 2     It  was  claimed  by  counsel,  in  the 
Illinois  R.  R.  cases,  that  the  violation  of  equality  made  the 
whole  tax  void,  but  the  court  held  this  to  be  untenable, 
saving:    "  Surely  they  should  pay  by  some  rule.     Should 
they  pay  nothing  and  escape  wholly  because  they  have  been 
assessed  too  high?     These  questions  answer  themselves."  ^ 
This  rule  rests  on  the  cardinal  principle  of  equity,  that  one 
who  seeks  equity  must  do  equity,  and  it  is  novf  firmly  estab- 
lished in  the  State  as  well  as  Federal  courts  in  the  law  of  in- 
junctions.    The  plaintiff  must  show  in  his  bill  what  portion 
of   the    tax   is  legal  and    what   is    illegal,    in   order  that 
the  court  may  be  able  to  determine  what  portion  of  the  tax 

1  92  U.  S.  575. 

2  National  Bank  u.  Kimball,  103  U.  S.  732;  Northern  Pacific  R.  R.  v. 
Clark,  153  U.S.  252,272;  Albuquerque  National  Bank  u.  Perea,  147 
U.  S.  87. 

3  92  U.  S.  616. 


716  MATTERS  OF  PROCEDURE.  §  536 

should  be  paid,  and  what  enjoined.  Facts,  not  legal  con- 
clusions, should  be  stated  in  this  regard,  and  an  averment 
of  "  readiness  to  pay  what  is  due  "  and  even  a  tender  in 
the  bill  is  insufficient. ^  The  payment  or  offer  to  pay  must 
be  actual  and  unconditional,  and  made  in  money  to  the  tax 
collector. 2  The  rule  however  obviously  does  not  apply 
where  plaintiff  complains  of  the  whole  tax  levied  and  all 
is  to  be  paid  or  nothing. ^  Moreover  should  it  appear  that 
the  tender  was  made  in  good  faith,  but  the  sum  tendered 
was  in  fact  less  than  is  due,  the  bill  is  not  dismissed  abso- 
lutely, but  an  opportunity  is  given  the  plaintiff  to  pay  the 
excess  with  the  costs  and  penalties.* 

§  536.  Wlien  application   must  first  be  made  to   State 
board. 

When  the  question  involved  is  not  the  validity  of  the 
tax  in  toto,  but  wholly  the  amount  of  the  assessment,  al- 
leged to  be  excessive,  either  on  account  of  overvaluation 
absolute  or  relative,  or  failure  to  make  a  required  deduc- 
tion, application  must  first  be  made  to  the  revising  or 
equalizing  board  appointed  by  the  State  to  hear  and  act  on 
complaints  of  excessive  or  erroneous  assessments.^  In  the 
absence  of  statute,  there  is  no  jurisdiction  in  the  courts  to 
review  the  discretion  of  such  tribunals,  that  is,  a  court  of 
equity  is  not  a  court  of  errors  to  review  their  decisions. 
But  the  procedure  established  by  the  State  for  the  correc- 
tion of  assessments,  whatever  it  is,  must  be  followed,  if 

1  High  on  Injunctions  (3d  ed.),  sec.  497,  and  cases  cited;  Huntington 
V.  Palmer,  7  Sawyer  355. 

2  Huntington  v.  Palmer,  7  Sawyer  355. 

3  Norwoods.  Baker,  172  U.  S.  1.  c.  p.  300;  Lewiston  Water  &  Power 
Co.  V.  Asotin  Co.,  24  Wash.  37. 

4  C.  B.  &  Q.  R.  R.  V.  Norton  Co.,  14  C.  C.  A.  458. 

5  Dundee  Co.  w.  Charlton,  32  Fed.  Rep.  192,  Beeson  u.  Johns,  124r 
U.  S.  56;  Hazzard  v.  O'Bannon,  36  Fed.  Rep.  854;  Hazzard  v.  O'Bannon, 
38  Fed.  Rep.  220.  See  also  California  &  Oregon  Land  Co.  v.  Gowen, 
48  Fed.  Rep.  771. 


§  537  MATTERS  OF  PROCEDURE.  717 

open^  the  taxpayer,  before  he  will  be  allowed  to  enjoin  the 
allegra  excessive  assessment.  If  the  State  practice  allows 
a  judicial  review  of  the  findings  of  equalizing  boards  upon 
writ  of  certiorari,  or  other  statutory  procedure,  resort  must 
be  had  to  the  remedy  thus  provided. 

It  has  been  decided  by  the  Supreme  Courts  that,  if  for 
any  reason  the  statutory  procedure  was  not  open  to  a  stock- 
holder, as  where  his  name  was  not  placed  on  the  assess- 
ment roll  until  the  time  for  correction  had  passed,  his 
remedy  then  is  in  a  court  of  equity  to  enjoin  the  collec- 
tion of  the  alleged  illegal  excess,  upon  payment  or  tender 
of  the  amount  admitted  to  be  due  on  a  just  valuation.  A 
party  failing  to  apply  to  the  State  board  and  not  resorting 
to  injunction  cannot  maintain  an  action  at  law  to  recover 
the  excess  of  taxes  alleged  to  have  been  paid  upon  the 
excessive  valuation.  The  court  said  that  the  money  col- 
lected on  such  an  assessment  could  not  be  recovered  back 
in  an  action  at  law,  any  more  than  money  collected  on  an 
erroneous  judgment  of  a  court  of  competent  jurisdiction, 
before  it  is  reversed. 

§  537.  State    statutory  remedies  do    not    oust   equitable 
jurisdiction  of  Federal  courts. 

Whatever  statutory  remedies  may  be  adopted  by  a  State 
for  testing  the  validity  of  tax  assessments,  they  do  not 
oust  the  jurisdiction  in  equity  of  the  Federal  courts,  when 
the  established  principles  and  rules  of  equity  permit  a  suitor 
to  invoke  that  jurisdiction. 2  The  Supreme  Court,  in  this 
case,  where   it  was  claimed   that  the   special   jurisdiction 

1  Stanleys.  Supervisors,  121  U.S.  535;  Williams  t;  Supervisors,  122 
U.  S.  154. 

2  Smyth  V.  Ames,  169  U.  S.  466,  516.  la  Taylor  v.  L.  &  N.  R.  R.,  31  C. 
C.  A.,  p.  545,  the  court,  ia  an  opiniou  by  Judge  Taft,  says  that  it  is  diflicult 
to  reconcile  this  opinion  on  its  facts  with  Ewing  v.  St.  Louis,  5  Wall. 
418,  which  is  not  in  terms  overruled. 


718  MATTERS  OF  PROCEDURE.  §  537 

vested  in  the  State  court  for  determinins;  the  reasonableness 
of  freight  charges  fixed  by  the  State  ousted  the  Circuit 
Court  of  its  jurisdiction,  held  that  a  suitor  entitled  to  sue 
in  the  Federal  courts  in  equity  cannot  be  deprived  of  that 
right  by  reason  of  being  allowed  to  sue  at  law  in  the  State 
court  on  the  same  cause  of  action,  saying:  "It  is  true 
that  an  enlargement  of  equitable  rights  arising  from  the 
statutes  of  a  State  may  be  administered  by  the  Circuit 
Courts  of  the  United  States.  But  if  the  case  in  its  essence 
be  one  cognizable  in  equity,  the  plaintiff — the  required 
value  being  in  dispute — may  invoke  the  equity  powers  of 
the  proper  Circuit  Court  of  the  United  States  whenever 
jurisdiction  attaches  by  reason  of  diverse  citizenship  or 
upon  any  other  ground  of  Federal  jurisdiction." 

The  existence,  of  a  statutory  procedure  for  determining 
the  validity  of  taxation  may  be  material  in  determining 
the  adequacy  of  a  remedy  at  law,i  that  is,  whether  the 
party  is  entitled  to  appeal  to  the  equity  jurisdiction  of 
the  Federal  court.  "  The  legislature  of  a  State  cannot 
determine  the  jurisdiction  of  the  courts  of  the  United 
States,  and  the  action  of  such  courts  in  according  a  remedy 
denied  to  the  courts  of  a  State  does  not  involve  a  question 
of  power."  2 

Certiorari  is  not  an  adequate  remedy  in  the  Federal 
courts,  as  their  power  to  issue  the  writ  is  limited  to  cases 
where  it  is  necessary  to  the  exercise  of  their  jurisdiction. 
Nor  is  this  remedy  in  the  State  court  adequate  in  a  case  of 
alleged  discrimination,  when  the  facts  relied  upon  to  prove 
discrimination  must  be  shown  de  hors  the  record. ^ 

In  the  Sixth  Circuit  it  was  held  by  Judge  Taft*  that, 

1  See  supra,  §  531,  note  3. 

2  Supreme  Court  in  In  re  Tyler,  149  U.  S.  164,  189. 

3  Taylor  v.  L.  &  N.  R.  R.  Co.,  31  C.  C.  A.  537.  In  New  York  the  juris- 
diction of  certiorari,  to  correct  inequalities  in  assessments,  is  enlarged 
by  statute. 

*  Grether  v.  Wright,  23  C.  C.  A.  498. 


§   538  MATTERS  OF  PROCEDURE.  719 

where  alBtate  statute  gives  a  remed}^  by  injunction  against 
the  assessment  and  collection  of  taxes  on  the  ground  of 
illegality,  this  statute  is  a  sufficient  reason  for  exercising 
the  equity  jurisdiction  of  the  Federal  court.  The  court 
based  this  ruling  upon  the  principle  stated  by  Justice  Miller 
in  the  case  of  Cummings  v.  Bank,i  that  Federal  courts  of 
equity  will  enforce  new  equitable  rights  conferred  by  State 
statutes.  Judge  Taft  said,  at  page  504:  "  The  main  pur- 
pose of  Section  723  of  the  Revised  Statutes  was  to  em- 
phasize the  necessity  for  preserving  to  litigants  in  courts 
of  the  United  States  the  right  to  trial  by  jur}'^  secured  by 
the  Seventh  Amendment  in  suits  at  common  law,  and  that, 
where  a  State  statute  grants  to  litigants  in  its  courts  an 
equitable  remedy  which  does  not  impinge  on  their  right  to 
a  trial  by  jury  at  common  law,  courts  of  the  United  States, 
sitting  in  the  State  as  courts  of  equity,  may  grant  the  same 
statutory  relief  as  that  afforded  by  the  State  tribunals." 

§  538.  State  can  only  be  sued  with  its  consent. 

A  sovereign  State  cannot  be  sued,  except  with  its  own 
consent.  This  immunity  is  secured  to  the  States  of  the 
American  Union  by  the  Eleventh  Amendment  to  the  Consti- 
tution of  the  United  States,  and  it  is  immaterial  that  the 
case  arises  under  the  Constitution,  or  laws,  or  treaties  of  the 
United  States. 2 

When  it  appears  that  the  State  is  an  indispensable  party 
to  enable  the  Federal  court,  according  to  the  rules  which 
govern  its  procedure,  to  grant  the  relief  sought,  it  will  de- 
cline to  take  jurisdiction. 3     The  court  said  however  in  this 

1  101  U.  S.  153. 

2  Hans  u.  Louisiana,  134  U.  S.  1,  holding  that  this  immunity  of  the  State 
from  suits  by  citizens  of  other  States,  and  citizens  or  subjects  of  foreign 
States  extends  to  suits  by  its  own  citizens.  The  court  in  its  opinion 
questions  the  decision  in  Chisholm  v.  Georgia,  2  Dallas  419,  which 
occasioned  the  adoption  of  the  Eleventh  Amendment. 

3  Cunningham  v.  Macon  &  Brunswick  R.  Co.,  109  U.  S.  446. 


720  MATTERS  OF  PROCEDURE.  §  539 

case,  page  451,  that"  inthe  desire  to  do  that  justice,  which 
in  many  cases  the  courts  can  see  will  be  defeated  by  an  un- 
warranted extension  of  this  principle,  they  have  in  some 
instances  gone  a  long  way  in  holding  the  State  not  to  be  a 
necessary  party,  though  some  interest  of  hers  may  be  more 
or  less  affected  by  the  decision." 

The  failure  of  several  States  of  the  Union  to  pay  debts 
which  they  contracted  to  pay,  in  connection  with  their  im- 
munity from  suit,  has  led  to  numerous  efforts  to  compel 
the  performance  of  these  obligations  through  judicial  pro- 
ceedings. Thus  an  effort  was  made  to  invoke  the  original 
jurisdiction  of  the  Supreme  Court,  which  extends  to  con- 
troversies between  two  or  more  States. i  This  was  sought  to 
be  effected  by  citizens  of  New  York  and  New  Hampshire,  who 
transferred  certain  State  bonds  of  Louisiana  to  their  respec- 
tive States,  so  that  suit  was  brought  in  the  name  of  those 
States  against  the  State  of  Louisiana  in  the  Supreme  Court. 
That  tribunal  however  declined  to  take  jurisdiction,^  saying 
that  one  State  cannot  create  a  controversy  with  another  State, 
within  the  meaning  of  the  Constitution,  by  assuming  the 
prosecution  of  debts  owing  by  the  other  State  to  its  citizens. 

When  the  State  gives  its  consent  to  be  sued  by  providing, 
as  is  sometimes  done,  that  claims  for  illegal  assessments 
can  be  made  throuo;h  suit  ao;ainst  certain  officials  in  certain 
of  its  own  courts,  this  suit  cannot  be  brought  in  the  Federal 
court.  Such  a  suit,  brought  in  the  United  States  Circuit 
Court,  was  held  properly  dismissed,  as  it  was  in  effect  one 
against  the  State  itself,  and  the  State  had  not  consented 
to  be  sued  except  in  one  of  its  own  courts. ^ 

§  539.  Suit  ag-aiast  State  and  against  State  oflacials  dis- 
tinguished. 

A  suit  is  in  effect  one  against  a  State,  within  the  prohibi- 

1  Constitution,  Art.  Ill,  Sec.  2. 

2  New  Hampshire  v.  Louisiana,  New  York  v.  Louisiana,  108  U.  S.  76. 

3  Smith  V.  Reeves,  178  U.  S.  436. 


S  539  MATTERS  OF  PROCEDURE.  721 

I 

tion  of  the  Eleventh  Amendment,  when  the  only  remedy 
sought  is  the  performance  of  a  contract  by  the  State,  and  the 
nominal  defendants  have  no  personal  interest  in  the  subject- 
matter  of  the  suit,  but  only  as  representing  the  State.  A  dis- 
tinction is  made  between  cases,  where  affirmative  official  ac- 
tion is  sought  from  State  officials  performing  an  obligation, 
which  the  State  owes  in  its  political  capacity,  and  actions  at 
lawi  or  suits  in  equity  maintained  against  those  who,  while 
claimino;  to  act  as  officers  of  the  State,  violate  and  invade 
personal  or  property  rights.  In  the  latter  class  of  cases 
the  officer  is  sued,  not  as  or  because  he  is  the  officer  of  the 
government,  but  as  an  individual,  and  the  court  is  not 
ousted  of  jurisdiction  because  he  asserts  authority  as  a 
State  official.  To  make  out  his  defense  he  must  show 
that  his  authority  was  sufficient  in  law  to  protect  him."'^ 

Thus  suits  against  State  officials  to  compel  the  perform- 
ance by  the  State  of  its  contracts,  by  seeking  to  enjoin 
them  from  bringing  suits  against  taxpayers  reported  to  be 
delinquent  but  who  had  tendered  tax  receivable  coupons 
in  payment  of  taxes  ,3  to  compel  the  levy  of  taxes  author- 
ized by  a  former  law,  but  contrary  to  subsequent  legisla- 
tion,* and  to  compel  the  State  to  perform  specifically  a 
contract  for  the  receipt  of  the  State  scrip  for  taxes, ^  were 
all  held  to  be  in  effect  suits  against  the  State  and  within 
the  inhibition  of  the  Eleventh  Amendment.  A  State 
therefore  cannot  be  compelled  by  suit  to  perform  its  con- 
tracts, that  is,  its  immunity  from  suit  prevents  the  judicial 
power  from  being  used  to  compel  the  performance  of   its 

1  See  Cunningham  v.  Railroad,  109_U.  S.  446;  United  States  u.  Lee, 
106  U.  S.  196. 

2  Hagoodw.  Southern,  117  U.  S.  52. 

3  In  re  Ayers,  123  U.  S.  443. 

4  Louisiana  es  rel.  N.  Y.  Guaranty  Co.  v.  Steele,  134  U.  S.  230.  See 
also  as  to  the  same  distinction,  Pennoyer  v.  McConnaughy,  140  U.  S.  1 ; 
Reagan  v.  Farmers'  Loan  &  Trust  Co.,  154  U.  S.  362. 

5  Hagood  V.  Southern,  117  U.  S.  52. 

46 


722  MATTERS  OF  PROCEDURE.  §  539 

contracts.  In  the  language  of  the  Supreme  Court,  "  its 
contracts  are  substantially  without  sanction  except  that 
which  arises  out  of  the  honor  and  good  faith  of  the  State 
itself,  and  these  are  not  subject  to  coercion." 

The  contract  clause  of  the  Constitution  however  i  pro- 
hibits laws  impairing  the  obligation  of  contracts.  If  such 
*  laws  are  passed,  they  are  unconstitutional  and  void.  The 
remedies  available  to  parties  who  hold  contracts  of  the 
'  State,  as  scrip  or  notes  receivable  for  taxes,  which  are  thus 
protected  against  impairment  by  subsequent  legislation, 
were  discussed  in  the  Virginia  Coupon  Cases.^ 

Under  the  same  principle,  where  the  act  to  be  done  or 
omitted  by  the  public  official  is  purely  ministerial,  in  the 
performance  or  omission  of  which  the  plaintiff  has  a  legal 
interest,  that  performance  or  omission  may  be  enforced  by 
the  court. ^  In  such  cases,  said  the  Supreme  Court,  the 
writs  of  mandamus  and  injunction  are  somewhat  correlative 
to  each  other.  In  either  case,  if  the  officer  pleads  the  au- 
thority of  an  unconstitutional  law  for  the  non-performance 
of  his  duty,  it  will  not  prevent  the  issue  of  the  writ.  An 
unconstitutional  law  will  be  treated  by  the  courts  as  null 
and  void.  This  is  the  principle  applied  by  the  court  in  en- 
forcing by  writ  of  fnandamus  the  levy  of  a  tax  for  the 
payment  of  municipal  bonds.* 

The  distinction  was  also  made,  in  the  Virginia  Coupon 
Cases, ^  between  the  State  itself  and  the  government  of  the 
State,  and  a  statute  enacted  by  the  State  in  violation  of  the 
Constitution  of  the  United  States  was  held  in  contempla- 
tion of  law  to  be  no  law,  and  therefore  a  tax  official  assum- 
ing to  act  thereunder  had  no  official  sanction  for  his  act. 

i  See  Chapter  II,  supra. 

2  See  Virginia  Coupon  Cases,  stipra,  §  53. 

2  Board  of  Liquidation  v.  McComb,  92  U.  8.  531. 

*  Seibert  v.  Lewis,  122  U.  S.  284,  and  infra,  §  545. 

^  Supra,  §  55. 


§  540   ^        MATTERS  OF  PROCEDURE.  723 

The  immunity  of  a  State  from  suit  does  not  extend  to  the 
municipalities  created  by  the  State ;  nor  does  it  prevent  the 
recovery  of  money  collected  by  tax  officials  for  the  State 
and  paid  under  protest,  when  the  money  collected  had  not 
in  effect  passed  into  the  State  treasury,  this  of  course  being 
dependent  upon  the  laws  of  the  State. 

§  540.  Where  jurisdiction  depends  upon  party,  it  is  party 
named  in  record. 

Under  the  distinctions  stated  in  the  cases  cited,  the  legal 
immunity  of  a  State  from  suit  does  not  prevent  the  equitable 
resistance  of  the  levy  of  an  illegal  tax.  The  assessment 
and  collection  of  taxes  must  be  made  through  officials,  and 
they  are  subject  to  legal  process  like  other  individuals.!  It 
was  said  in  Osborn  v.  Bank  of  the  United  States, 2  by  Chief 
Justice  Marshall,  in  sustaining  an  injunction  against  the 
levying  of  a  license  tax  upon  the  branch  of  the  United 
States  Bank  in  Ohio,  that,  in  all  cases  where  jurisdiction 
depends  upon  the  party,  it  is  theparty  named  in  the  record, 
not  the  party  interested  in  the  cause.  This  broad  state- 
ment has  been  modified  to  the  extent  of  holding  that,  where 
the  suit  is  in  effect  one  against  the  State,  as  in  the  cases 
cited,  and  the  State  is  the  real  defendant,  and  therefore  an 
indispensable  party,  the  jurisdiction  must  fail  though  the 
State  is  not  a  party  to  the  record.-^  It  was  said  by  the 
Supreme  Court*  however  that,  while  this  ruling  in  Osborn 
V.  Bank  of  the  United  States  had  been  qualified  to  a  certain 
degree  by  some  of  the  subsequent  decisions  of  the  Supreme 
Court,  yet  the  general  doctrine  there  announced,  that  the 
Circuit  Courts  of  the  United  States  will  restrain  a  State 
officer   from  executing   the  unconstitutional   statute  of    a 


1  Stipra,  §  518. 

2  Supra,  §  8. 

3  lu  re  Ayers,  123  U.  S.  443,  488. 
*  la  re  Tyler,  149  U.  S.  164,  191. 


724  JIATTEES  OF  PROCEDURE.  §   541 

State,  when  to  execute  it  would  be  to  violate  rights  and  priv- 
ileges of  the  complainant  that  had  been  guaranteed  by  the 
Constitution  and  would  do  irreparable  damage  and  injury  to 
him,  had  never  been  departed  from.  If  an  individual,  act- 
ing under  the  assumed  authority  of  a  State  as  one  of  its 
officers  and  under  color  of  its  laws,  comes  into  conflict  with 
the  superior  authority  of  a  valid  law  of  the  United  States, 
•he  is  stripped  of  his  authority  and  subjected  to  the  conse- 
quences of  his  conduct.  A  State  has  no  power  to  impart 
to  him  any  immunity  from  responsibility  to  the  supreme 
authority  of  the  United  States.! 

Although  the  tax  law  may  not  of  itself  be  illegal,  it  may 
be  wrongfully  administered  by  officers  of  the  State,  so  as 
to  make  the  administration  an  illegal  burden  and  exaction 
upon  the  individual  and  a  violation  of  his  constitutional 
rights.  In  such  a  case  the  fact  that  the  officer  assumes  to 
act  under  a  valid  law  wiU  not  oust  the  courts  of  their  juris- 
diction to  restrain  his  excessive  and  illegal  acts. 2 

§  541.  Collection  of  taxes  on  property  in  possession    of 
receiver  of  Federal  court. 

When  property  is  in  the  possession  of  a  receiver  appointed 
by  a  Circuit  Court  of  the  United  States,  it  is  not  subject 
to  seizure  for  State  taxes.  The  exclusive  remedy  of  the 
tax  collector  is  to  make  application  in  the  court  which 
appointed  the  receiver,  where  the  priority  of  payment 
granted  by  the  laws  of  the  State  will  be  recognized  and 
enforced. 3  The  receiver  of  the  court  in  charge  of  a  rail- 
road  may  obtain  an  injunction  preventing  the  officer, 
pendente  Ute^  from  seizing  property.* 

1  In  re  Ayers,  123  U.  S.,  p.  507. 

2  Reagan  v.  Farmers'  Loan  &  Trust  Co.,  154  U.  S.  390. 

3  In  re  Tyler,  149  U.  S.  164. 

*  Clark  V.  McGhee,  31  C.  C.  A.  321.  Central  Trust  Co.  v.  Wabash 
Ry.  Co.,  26  Fed.  Rep.  11,  co/Ura,  was  decided  before  the  Tyler  case. 


§  542    ^       MATTERS  OF  PROCEDURE.  725 

The  Act  of  Congress  i  permits  a  receiver  to  be  sued 
without  leave  of  court,  but  provides  that  such  suit  shall 
be  subject  to  the  general  equity  jurisdiction  of  the  court  in 
which  the  receiver  was  appointed,  and  that  the  receiver 
shall  manage  the  property  according  to  the  valid  laws  of 
the  State  in  which  such  property  shall  be  situated.  The 
Supreme  Court  said,  in  the  case  cited,  that  property  in 
possession  of  the  receiver  is  already  in  sequestration, 
already  held  in  equitable  execution,  and  that,  while  the 
lien  of  the  taxes  must  be  recognized  and  enforced,  the 
orderly  administration  of  justice  requires  this  to  be  done 
by  and  under  the  sanction  of  the  court.  The  receiver  in 
that  case  had  filed  a  bill  in  equity  to  restrain  the  collection 
of  the  taxes,  on  the  ground  that  they  were  unconstitu- 
tional and  illegal  in  part,  tendering  the  amount  alleged  to 
be  due.  The  court  had  thereupon  granted  an  injunction 
in  violation  of  which  the  sheriff  levied  on  the  railroad  cars 
and  was  committed  for  contempt.  He  sued  out  a  wi'it  of 
habeas  corj)us,  claiming  that  the  suit  was  in  effect  one 
at^ainst  the  State,  and  that  the  statutes  of  North  Carolina 
provided  a  statutory  remedy  for  illegal  assessment  and 
taxation.  But  the  Supreme  Court  said  that  the  legisla- 
ture of  a  State  cannot  determine  the  jurisdiction  of  the 
courts  of  the  United  States,  and  that,  as  the  property  was 
in  the  custody  of  the  Circuit  Court,  under  possession  taken 
in  a  case  confessedly  within  its  jurisdiction,  the  petitioner 
was  in  contempt  and  the  court  was  possessed  of  full  power 
to  vindicate  its  dignity  and  compel  respect  of  its  mandates. 

§  542.  Objections  to  jurisdiction  and  defenses  to  merits. 

The  distinction  between  objections  to  the  jurisdiction  of 
the  United  States  Circuit  Court  to  try  a  suit  seeking  to 
enjoin  a  State  tax  and  defenses  which  go  to  the  merits  and 

1  24  statutes  552,  c.  373. 


726  MATTERS  OF  PROCEDURE.  §  543 

not  to  the  jurisdiction  was  illustrated  in  a  recent  case 
from  Mississippi.!  The  United  States  Circuit  Court  dis- 
missed for  want  of  jurisdiction  a  bill  of  a  railroad  com- 
pany seeking  an  injunction  against  a  tax  collector  on 
the  ground  of  an  alleged  contract  of  exemption.  Plain- 
tiff appealed.  In  the  Supreme  Court,  motion  was  made 
to  dismiss  the  bill,  because  the  assessment  had  been  com 
pleted,  suit  brought  for  the  taxes,  and  judgment  recovered 
in  the  State  court.  The  court  however  denied  the  mo- 
tion, holding  that  this  was  a  defense  to  the  merits,  not 
the  jurisdiction,  and  that  it  did  not  follow  that  the  judg- 
ment might  not  be  reversed,  as  an  appeal  to  the  State 
Supreme  Court  was  pending  undetermined.  Neither  was 
a  question  of  jurisdiction  raised  by  the  fact  that  the 
plaintiff  did  not  show  its  right  to  proceed  under  the  94th 
equity  rule,  as  this  did  not  raise  a  question  of  jurisdiction, 
but  of  the  authority  of  plaintiff  to  maintain  the  bill.  The 
court  said,  page  34:  "  Jurisdiction  is  the  right  to  put  the 
wheels  of  justice  in  motion  and  to  proceed  to  the  final 
determination  of  the  cause  upon  the  pleadings  and  the 
evidence."  It  was  further  said  that  motions  are  generally 
appropriate  only  in  the  absence  of  remedies  by  regular 
pleadings,  and  cannot  be  made  available  to  settle  important 
questions  of  law  or  to  dispose  of  the  merits  of  the  case. 
The  decrees  of  the  circuit  court  were  therefore  reversed 
and  remanded  for  hearing  upon  the  merits. 

§  543.  Jvidiciary  concluded  by  decision   of   political  de- 
partment of  government. 

Our  form  of  government,  national  and  State,  is  based 
upon  the  distinction  between  the  great  departments  of 
government,  and  the  judiciary  will  follow  the  decision  of 
the  legislative  or   political  department,  on  a  subject  law- 

1  Illinois  Central  R.  R.  v.  Adams,  180  U.  S.  28. 


§  544  MATTERS  OF  PROCEDURE.  727 

fully  determined  thereby,  although  such  decision  may  inci- 
dentally affect  property  rights.  Thus  the  Supreme  Court 
heldi  that  a  taxpayer  in  Alexandria,  Virginia,  was  estopped 
from  resisting  the  collection^  of  taxes  on  the  orround  that 


ivJTs 


the  annexation  to  Virginia  w!ff  illegal,  and  that  the  county 
was  in  the  jurisdiction  of  the  District  of  Columbia.  The 
court  said  that  the  judiciary  would  follow  the  action  of  the 
political  department  of  the  government,  which  had  uni- 
formly recognized  the  transfer  as  a  settled  fact,  the  State 
of  Virginia  having  been  in  de  facto  possession  of  the 
County  of  Alexandria  since  1847. 

§  544.  No  equity  jurisdiction  in  Federal  courts  to  enforce 
levy  of  tax. 

The  application  of  the  contract  clause  in  the  Constitu- 
tion of  the  United  States  to  the  right  to  a  levy  of  taxes  in 
enforcement  of  municipal  obligations  is  established. 2  But 
this  right  cannot  be  enforced  through  a  suit  in  chancery  to 
compel  the  levy  of  the  tax.  The  appropriate,  though  not 
always  effective  remedy,  is  an  action  at  law,  the  establish- 
ment by  judgment  of  the  validity  of  the  claim  and  of  the 
amount  due,  and  then  a  mandamus,  on  the  return  of  the 
execution  unsatisfied,  requiring  the  proper  municipal  au- 
thority to  raise  by  taxes  the  amount  necessary  to  satisfy 
the  debt.  The  right  to  this  remedy  is  dependent  upon  the 
authority  of  the  corporation  to  levy  and  collect  taxes  for 
their  payment.^ 

The  mere  fact  that  the  remedy  by  mandamus  has 
proven    ineffectual,   and    that   no  officer  can  be  found  to 

1  Phillips  V.  Payne,  92  U.  S.  130,  following  Luther  v.  Borden,  7 
How.  1. 

2  Supra,  §  73. 

3  Heine  v.  Levee  Commissioners,  19  Wall.  655,  Justices  ClifEord 
and  Swayne  dissenting;  Walkley  v.  Muscatine,  6  Wall.  481;  Rees  v. 
Watertown,  19  Wall.  107;  Thompson  v.  Allen  County,  115  U.  S.  550, 
Justice  Harlan  dissenting. 


728  MATTERS  OF  PROCEDURE.  §  545 

perform  the  duty  of  levying  and  collecting  the  taxes  con- 
stitutes no  sufficient  ground  of  equity  jurisdiction.  The 
principle  is  the  same  if  no  one  can  be  found  to  act  as  tax 
collector  of  regular  taxes,  and  yet  this  gives  no  jurisdiction 
to  a  court  of  equity  to  fill  the  office  or  appoint  a  receiver 
to  perform  its  functions.  Inadequacy  of  legal  remedy 
does  not  consist  merely  in  failure  to  produce  the  money 
sousfht  to  be  collected,  as  that  is  a  misfortune  often  atteud- 
ant  upon  all  remedies.  The  remedy  must  be,  in  its  nature, 
not  fitted  or  adapted  to  the  end  in  view.l 

§  545.  Mandamus  to  issue  tax. 

When  a  municipality  is  authorized  to  issue  bonds,  this 
authorization  implies  and  carries  with  it,  in  the  absence  of 
specific  provision,  the  power  t-o  adopt  the  ordinary  means 
employed  by  such  bodies  to  raise  funds  for  the  payment 
of  bonds,  and  the  ordinary  means  is  taxation.  The  power 
to  levy  a  tax  is  therefore  carried,  when  authority  to  borrow 
money  or  incur  an  obligation  is  conferred  upon  a  nmnicipal- 
ity ,  without  any  special  mention  that  such  power  is  granted. 
The  fact  that  specific  property  is  pledged  for  the  payment 
of  the  bonds,  e.  g.  the  railroad  stock  for  which  the  bonds 
were  issued,  does  not  make  them  any  the  less  the  general 
obligations  of  the  municipality,  nor  deprive  plaintiffs  of  the 
right  to  amajidamiis,  compelling  the  levy  of  a  tax  for  their 
payment,  si  nee  tTie  pledge  is  only  by  way  of  collateral  secur- 
ity.2    It  is  otherwise  however,  when  the  power  to  tax  is  ex- 

1  Thompson  v.  Allen  County,  supra. 

2  United  Slates  ex  rel,  v.  New  Orleans,  98  U.  S.  381;  Ralls  County  v. 
United  States,  105  U.  S.  736;  Quincy  v.  Jackson,  113  U.  S.  337;  Scotland 
County  Court  v.  Hill,  140  U.  S.  46.  In  Findlay  v.  McAllister,  113  U.  S. 
104,  it  was  held  that  the  confederating  together  of  persons  to  prevent  the 
levy  of  a  county  tax  in  obedience  to  a  writ  of  mandamus,  and  the  preven- 
tion of  the  sale  of  property  seized  under  the  levy  by  threats  and  by  in- 
timidating bidders,  and  the  intimidation  of  taxpayers  and  influencing 
them  not  to  pay  the  tax,  whereby  the  judgment  creditor  was  injured, 
constituted  a  good  cause  of  action. 


§  546  MATTERS  OF  PROCEDURE.  729 

pressly  limited  by  statute  at  the  time  of  the  issue  of  the 
bonds,  so  that  the  bondholder  by  the  terms  of  his  contract 
is  only  entitled  to  look  to  a  specific  tax  for  their  payment.i 

§  546.  Mandamus   must  be  based  upon  statute  autlioriz- 
ing  tax. 

This  right  to  a  mandamus  must  be  based  upon  the 
statute  making  it  obligatory  upon  the  municipal  author- 
ities to  levy  a  tax  in  payment  of  the  judgment.  Thus 
it  was  said  by  the  Circuit  Court  of  Appeals  for  the 
Eighth  Circuit,^  that,  where  no  statute  expressly  made  it 
obligatory  upon  the  county  to  levy  a  tax  to  pay  a  judg- 
ment against  it,  and  it  did  not  appear  that  the  judgment 
was  on  a  security  issued  under  a  statute  making  it  obliga- 
tory to  levy  a  tax  to  pay  it,  the  court  had  no  authority  to 
compel,  by  mandamus,  the  levy  of  a  tax  to  pay  such  judg- 
ment. Under  our  system  of  government,  said  the  court, 
the  power  to  tax  is  a  legislative  function  exclusively  and 
cannot  be  exercised  except  in  pursuance  of  legislative 
authority.  A  court  has  no  taxing  powers,  and  can  impart 
none  to  the  county  authorities.  It  has  therefore  no  jurisdic- 
tion to  coerce  the  levy  of  a  tax,  except  where  the  law  has 
made  it  the  clear  and  absolute  duty  of  the  county  authori- 
ties to  levy  such  tax.  When  the  law  has  made  it  the  duty 
of  the  levying  court  or  board  to  levy  a  tax  to  pay  a  speci- 
fied class  of  indebtedness,  the  Federal  court  in  which  a 
judgment  has  been  rendered  in  that  class  of  indebtedness 
may,  by  mundamus,  compel  the  assessment,  levy  and  col- 
lection of  a  tax  to  pay  such  judgment ;  but  this  is  the  limit 
of  its  power.  As  there  was  nothing  shown  as  to  the 
nature  of  the  cause  of  action  which  affected  the  contract 
right  to  the  levy  of  a  tax,  it  was  treated    as  an  ordinaiy 

1  United  States  v.  County  of  Macon,  99  U.  S.  582;     East  St.  Louis  v. 
United  States  ex  rel.  Zebley,  110  U.  S.  321. 

e  Board  of  Commissioners  v.  King,  14  C.  C.  A  421 . 


730  MATTERS  OF  PROCEDURE.  §  547 

case   of    county  indebtedness,    and    the    discretion    of  the" 
commissioners  was  hekl  not  subject  to    control   by   man- 
damus. 

§  547.  Local  tax  laws  administered  in  Federal  courts. 

The  jurisdiction  of  the  Federal  court  is  frequently  in- 
voked on  the  ground  of  diverse  citizenship  in  cases  involv- 
ing the  construction  and  application  of  State  tax  laws, 
where  there  is  no  distinct  Federal  question  involved.  Thus 
tax  deeds  may  be  offered  in  evidence  in  the  Federal  courts 
in  ejectment  suits  or  other  actions  affecting  titles  to  real 
estate.  It  is  a  general  rule  that  the  Federal  courts  in 
such  cases,  exercising  a  concurrent  jurisdiction  with  the 
State  courts,  administer  the  State  laws,  as  construed  by  the 
State  courts.  Thus  the  Supreme  Court  said  in  a  case 
from  Mississippi,  involving  the  validity  of  a  tax  deed;i 
*'  No  question  is  more  clearly  a  matter  of  local  law  than 
one  arising  under  the  tax  laws.  Tax  proceedings  are  car- 
ried on  by  the  State  for  the  purpose  of  collecting  its  rev- 
enue, and  the  various  steps  which  shall  be  taken  in  such 
proceedings,  the  force  and  effect  to  be  given  to  any  act  of 
the  taxing  officers,  the  results  to  follow  the  non-payment 
of  taxes,  and  the  form  and  efficacy  of  the  tax  deed,  are 
all  subjects  which  the  State  has  power  to  prescribe,  and 
peculiarly  and  vitally  affecting  its  well-being.  The  deter- 
mination of  any  questions  affecting  them  is  a  matter  primar- 
ily belonging  to  the  courts  of  the   State,  and  the  national 

1  Lewis  V.  Monson,  151  U.  S.  545.  In  Geekie  v.  Kirby  Carpenter  Co., 
106  U.  S.  379,  the  court,  construing  the  tax  law  of  Wisconsin,  held  that 
a  tax  deed  was  invalidated  by  the  fact  that  the  sum  to  raise  which  the 
land  was  sold  included  five  cents  for  the  United  States  Revenue  stamp, 
to  be  put,  and  which  was  put,  on  the  certificate  issued  to  the  purchaser 
at  the  sale.  The  court  said  that  the  item  was  improperly  included,  but 
that  the  error  was  cured  by  the  provision  of  the  "Wisconsin  statute  of 
limitations  affecting  tax  deeds,  as  construed  by  the  courts  of  that  State. 


§    548  MATTERS  OF  PROCEDURE.  731 

tribunals  universally  follow  their  rulings  except  in  cases 
where  it  is  claimed  that  some  right  protected  by  the  Federal 
Constitution  has  been  invaded." 

§  548.  Local  law  and  general  law  distinguished. 

It  is  only  on  questions  of  local  law  involving  the  construc- 
tion of  a  State  constitution  or  statute,  or  which  have  become 
rules  of  property  in  the  State,  that  the  Federal  courts  follow 
as  of  course  the  decisions  of  the  State  courts.  Such  decisions 
aFe-»©t  "laws  of  the  State"  within  the  meaning  of  Section 
721 ,  Revised  Statutes,  which  provides  that,  in  the  absence  of 
Federal  leoislation,  the  laws  of  the  several  States  shall  be  re- 
garded  as  rules  of  decision  in  actions  at  law  in  the  Federal 
courts  in  cases  where  they  appl}^ .  ^  Rules  of  property  may  thus 
be  established  in  a  State  in  regard  to  real  estate  and  domes- 
tic relations,  which  the  Federal  courts  will  follow,  but  upon 
questions  of  general  jurisprudence  or  commercial  law,  the 
Federal  courts  exercise  their  own  judgment.  Thus  the  public 
purpose  which  will  warrant  the  exercise  of  the  State  taxing 
power  in  the  payment  of  municipal  bonds  is  a  question  of 
general  law.^  This  distinction  was  the  basis  of  the  judicial 
conflict  in  several  States  between  the  State  and  Federal  courts , 
as  to  the  validity  of  such  municipal  obligations.  The  court 
said,  in  the  case  cited,  at  p.  690:  "  The  nature  of  taxation, 
what  uses  are  public  and  what  are  private,  and  the  extent  of 
unrestricted  legislative  power,  are  matters  which,  like  ques- 
tions of  commercial  law,  no  State  court  can  conclusively 
determine  for  us." 

The  Supreme  Court  can  exercise  this  independent  judg- 

1  Baltimore  &  Ohio  R.  R.  Co.  v.  Baugh,  149  U.  S.  368,  Justice  Field 
dissenting;  Burgess  v.  Seligman,  107  U.  S.  20 ;  Warburton  v.  White,  176  U. 
S.  484.  See  also  "  The  Common  Law  in  the  Federal  Courts,"  by  E.  C. 
Eliot  of  St.  Louis,  36  Am.  Law  Review,  498. 

-  Olcott  V.  Supervisors,  16  Wall.  678,  Chief  Justice  Chase  and  Justices 
Davis  and  Miller  dissenting. 


732  MATTERS  OF  PROCEDURE.  §  549 

ment  on  questions  of  general  law,  as  distinguished  from 
local  law,  only  in  the  regular  course  of  its  jurisdiction. 
Thus,  on  writ  of  error  to  a  State  court,  it  can  only  decide 
a  Federal  question,  and  an  erroneous  decision  of  a  State 
court  upon  a  question  of  general  law  does  not  constitute  a 
Federal  question.  The  Supreme  Court  may  dismiss  a  writ 
of  error  to  review  the  decision  of  a  State  court  in  such  a 
case,  on  the  ground  that  no  Federal  question  is  involved, 
when,  if  the  case  had  come  before  it  in  its  regular  appel- 
late jurisdiction  over  the  United  States  Circuit  Court,  it 
would  have  decided  the  question  differently  from  the  way 
the  State  court  decided  it.i 

§  549.  Suits  by  stockholders  in  right  of  corporation. 

The  Income  Tax  decision  was  rendered  in  what  is  known 
as  a  stockholder's  suit,  one  brought  by  a  stockholder  in 
rio-ht  of  the  corporation  to  restrain  the  corporate  man- 
ao-ement.from  threatened  illegal  use  of  the  corporate  assets. 
The  right  to  maintain  such  a  suit  to  restrain  payment  of 
an  alleged  illegal  tax  was  sustained  by  the  Supreme  Court 
in  Dodge  v.  Woolsey.'^  When  this  case  was  decided  in 
1859,  there  was  no  means  by  which  the  corporation 
could  bring  a  suit  in  the  United  States  Circuit  Court 
ao-ainst  a  citizen  of  the  same  State,  in  resisting  a 
tax  on  the  ground  of  a  Federal  right.  Subsequently, 
by  the  Act  of  1875,  the  law  was  amended  so  as  to 
give  the  right,  which  still  exists,  to  bring  a  suit  in  the 
United  States  Circuit  Court,  on  the  ground  that  the  case 
involves  a  claim  under  the  Constitution  or  laws  of  the 
United  States,  so  that  a  stockholder's  suit  is  no  longer  nec- 

1  See  Central  Land  Co.  u.  Laidley,  159  U.  S.  103,  where  Justice  Gray 
in  his  opinion  calls  attention  to  an  illustration  of  this  distinction  in  two 
decisions  relating  to  municipal  bonds  of  Iowa.  Gelpke  v.  Dubuque,  1 
Wall.  175,  and  Railroad  Co.  v.  McClure,  10  Wall.  511. 

2  18  How.  331. 


§   550  MATTERS  OF  PROCEDURE.  733 

essary  to  secure  original  Federal  jurisdiction  for  a  domestic 
corporation  in  resisting  taxation,  on  the  ground  of  a  Fed- 
eral right. 

This  procedure  however  was  resorted  to  in  other  cases 
not  involving  Federal  questions,  where  it  was  desired  to  se- 
cure the  jurisdiction  of  the  United  States  Circuit  Court  on 
the  ground  of  adverse  citizenship,  and  the  "  non-resident 
stockholder  "  became  a  frequent  litigant  in  the  Federal 
courts.  This  resulted  in  the  re-examination  of  the  whole 
subject  of  stockholders'  suits,  in  Hawes  v.  Oaldand,  de- 
cided in  1881,  wherein  an  exhaustive  opinion  was  rendered 
by  Mr.  Justice  Miller,  i  and  the  conclusions  of  the  opinion 
were  formulated  in  Equity  Eule  94,  still  in  force. ^ 

§  550.  Burden  of  proof  in  resisting  taxation. 

The  burden  of  proof,  which  devolves  upon  the  actor  in 
all  litigation,  is  emphasized  in  tax  litigation,  that  is,  in 
litigation  involving  the  legality  of  taxation,  in  that  the 
htigant  must  overcome  the  presumption  that  assumes  the 
vaKdity  of  the  exercise  of  legislative  power,  and  the  further 
presumption  when  the  acts  of  taxing  officers  are  complained 
of,  that  such  officers  do  not  violate  their  sworn  duty. 
This  principle  was  forcibly  illustrated  in  a  case  from  New 
Orleans,  where    a    State   bank  complained  of    an  alleged 

1  104  u.  s.  450. 

2  Equky  Rule  94  (adopted  Oct.  Term,  1881)  :  "  Every  bill  brought  by 
one  or  more  stockholders  in  a  corporation  against  the  corporation  and 
other  parties,  founded  on  rights  which  may  properly  be  asserted  by  the 
corporation,  must  be  verified  by  oath,  and  must  contain  an  allegation 
that  the  plaintiff  was  a  shareholder  at  the  time  of  the  transaction  of 
which  he  complains,  or  that  his  share  had  devolved  on  him  since  by  the 
operation  of  law,  and  that  the  suit  is  not  a  collusive  one  to  confer  on  a 
court  of  the  United  States  jurisdiction  of  a  case  of  which  it  would  not 
otherwise  have  cognizance.  It  must  also  set  forth  with  particularity  the 
efforts  of  the  plaintiff  to  secure  such  action  as  he  desires  on  the  part  of 
the  managing  directors  or  trustees,  and,  if  necessary,  of  the  sharehold- 
ers, and  the  causes  of  his  failure  to  obtain  such  action." 


734  MATTERS  OF  PBOCEDURE.  §  551 

illegal  assessment,  on  the  ground  that  its  capital  was  in- 
vested in  legal  tender  notes,  which  were  then  exempt  from 
taxation.  The  bank  proved  that  it  had  some  $760,000 
invested  in  such  notes,  but  its  nominal  capital  was  a  million 
dollars,  and  it  owed  its  depositors  over  $3,000,000.  The 
Supreme  Courti  said  that  no  proof  was  offered  to  show 
that  the  cash  exclusively  constituted  the  capital,  and  that 
the  cash  on  hand  was  just  as  applicable  to  the  depositors 
as  to  the  capital.  The  burden  of  proof  was  therefore  on 
the  bank  to  show  that  it  had  been  unlawfully  taxed,  and, 
in  the  absence  of  such  proof,  the  decision  of  the  assessor 
must  stand. 

§  551.  Federal  taxes  cannot  be  enjoined. 

The  United  States  statutes,  already  referred  to,2  pro- 
hibit the  restraining  of  the  assessment  or  collection  of  any 
tax  in  any  court.  This  statute  only  applies  to  taxes 
levied  by  Congress,  and  neither  a  Federal  nor  a  State 
court  has  authority  to  stay  the  collection  of  such  a  tax. 
If  an  injunction  restraining  the  assessment  and  collection 
of  a  national  tax  is  granted  by  a  State  court,  it  will  on 
removal  of  the  case  to  the  United  States  Circuit  Court  be 
dissolved. 3 

The  remedy,  given  by  Act  of  Congress,  of  payment 
under  protest  and  suit  to  recover,  is  exclusive,  although 
the  tax  is  alleged  to  have  been  illegally  assessed.* 

The  appropriate  remedy  for  recovery  of  taxes  under  the 
revenue  acts  of  Congress  is  an  action  of  assumpsit  against 
the  collector  for  money  had  and  received.  Where  a  party 
voluntarily  pays  money,  he  is  without  remedy,  but  when 
he  pays  it  by  compulsion,  or  under  protest,  he  can  sue  to 

1  Canal  and  Banking  Co.  v.  New  Orleans,  99  U.  S.  97. 

2  Supra,  §  530. 

3  Kissinger  v.  Bean,  7  Biss.  60. 

4  Snyder  v.  Marian,  109  U.  S.  189. 


§   552  MATTERS  OF  PROCEDURE.  735 

recover.  The  United  States  Circuit  Court  has  jurisdiction 
of  such  an  action  irrespective  of  citizenship.! 

In  the  Income  Tax  Cases^  the  collector  was  not  enjoined 
from  collecting  the  tax,  but  the  corporation  defendant  was 
enjoined  from  paying  it. 

The  statute  was  held  to  have  no  application  in  a  case  of 
United  States  taxes,  where  the  collector  undertook  to  make 
a  levy  for  a  tax,  which  had  been  determined  by  the  court 
not  to  be  lawful,  and  an  injunction  was  granted  restraining 
the  levy. 3 

§  552.  Remedy  against  tax  officials  individually. 

In  theory  the  officer  .who  enforces  an  illegal  tax,  that  is,  . 
a  tax  levied  under  an  unconstitutional  statute,  has  no  official 
sanction  for  his  acts.  In  the  language  of  the  Supreme 
Court:*  "  An  unconstitutional  act  is  not  a  law;  it  confers 
no  rights  ;  it  imposes  no  duties  ;  it  affords  no  protection  ; 
it  creates  no  office;  it  is,  in  legal  contemplation,  as  inop- 
erative as  though  it  had  never  been  passed."  The  same 
court  has  said  that  the  ground  of  the  jurisdiction  in  re- 
straining the  collection  of  taxes  imposed  in  the  name  of 
the  State,  but  contrary  to  the  Constitution  of  the  United 
States,  and  sought  to  be  collected  by  seizure  of  property, 
is  that  the  officers,  though  professing  to  act  as  officers  of  the 
State,  are  threatening  a  violation  of  the  property  or  personal 
rights  of  the  complainant,  fer  which  they  are  personally 
and  individually  liable  as  trespassers. & 

The  taxing  power  however  may  be  unlawfully  exercised 
under  a   valid    statute.     Thus    assessors    may    err  in    not 

1  City  of  Philadelphia  v.  Collector,  5  Wall.  720.  This  was  the  pro- 
cedure in  the  Insular  Cases,  supra,  §  495. 

*  Supra,  §  486. 

'  Frayser  v.  Russell,  3  Hughes  227. 

*  Norton  v.  Shelby  County,  118  U.  S.,  p.  442. 

*  In  re  Ayers,  123  U.  S.,  p.  500. 


736  MATTERS  OF  PROCEDURE.  §  552 

allowing  exemptions  or  deductions,  or  a  tax  may  be  exces- 
sive through  discriminating  valuation.  In  such  cases  the 
taxpayer  is  subjected  to  illegal  taxation  under  a  valid 
law,  and  the  principle  above  stated  has  no  application. 
Futhermore  the  principle  of  the  individual  responsibility 
of  taxing  officials  is  not  of  great  practical  importance,  even 
in  cases  where  it  applies,  as  the  remedy  at  law  for  damages 
against  trespassing  officials  individually  is  rarely  adequate 
to  resist  the  unlawful  exercise  of  the  taxing  power. 

As  tax  assessors  are  empowered  to  exercise  their  discre- 
tion in  the  valuation  of  property,  it  is  clear  that  they  cannot 
be  charged  with  personal  responsibility  for  the  erroneous 
exercise  of  such  discretion.  Thus  it  was  held  in  New 
York  1  that  assessors  having  jurisdiction  of  the  perspn 
taxed  and  the  subject-matter  are  not  individuaW}'^  liable  for 
an  erroneous  assessment  made  in  good  faith,  even  in  refus- 
ing to  allow  deduction  for  debts  in  the  case  of  bank  shares, 
as  required  by  the  Act  of  Congress.  On  WTit  of  error  to 
the  Supreme  Court,  this  decision  was  held  to  involve, 
not  any  Federal  question, ^  but  one  of  general  municipal 
law,  to  be  governed  by  the  common  law  or  the  statute 
law  of  the  State.  The  fact  that  the  error  consisted  of 
a  misconstruction  of  an  Act  of  Cono-ress  could  make 
no  difference,  for  an  officer  acting  judicially  is  no  more 
liable  for  a  mistaken  construction  of  an  Act  of  Cong-ress 
than  he  would  be  for  mistaking  the  common  law  or  a  State 
statute.  The  immunity  declared  in  this  case  is  that  which 
is  always  extended  where  public  officers  are  vested  with  a 
discretion  in  the  performance  of  their  duties. 

A  tax  collector  is  protected  in  the  collection  of  tax  bills 
fair  upon  their  face,  regularly  issued  from  the  tribunal 
having  jurisdiction,  and  containing  nothing  by  way  of 
recital  or  omission  to  apprise  him  that  they  were  issued 

1  Williams  ».  Weaver,  75  N.  Y.  32. 

2  100  U.  S.  547. 


§  553  MATTERS  OF  PROCEDURE.  737 

without  legal  authority.  He  is  protected  in  such  action 
against  all  illegalities  except  his  own.^  This  is  the  rule 
applied  by  the  United  States  courts  as  to  the  United  States 
collectors.  The  Supreme  Court  saj^s  that  of  such  an  officer 
the  law  exacts  unhesitating  obedience  to  its  process.- 
This  immunity  is  extended  upon  considerations  of  public 
policy  and  requires  that  the  process  shall  be  issued  by  an 
authority  having  jurisdiction  of  the  subject-matter  and 
that  it  be  regular  upon  its  face.  It  applies  only  to  per- 
sonal liability,  and  does  not  extend  to  the  protection  of 
any  title  acquired  and  conveyed  by  the  collector  in  enforc- 
ino;  an  illeg-al  tax. 

An  officer  who  was  charged  with  the  specific  duty  of 
levying  taxes  to  pay  a  judgment  was  held  responsible  in 
damages  to  the  judgment  plaintiff  for  failure  to  levy  the  tax 
as  directed  by  a  writ  of  mandamus.  The  court  said,  pa^e 
138 :  ^  "  The  rule  is  well  settled,  that  where  a  law  requires 
absolutely  a  ministerial  act '  to  be  done  by  a  public  officer, 
and  he  neglects  or  refuses  to  do  such  act,  he  may  be  com- 
pelled to  respond  in  damages  to  the  extent  of  the  injury 
arising  from  his  conduct.  There  is  an  unbroken  current 
of  authorities  to  this  effect.  A  mistake  as  to  his  duty  and 
honest  intentions  will  not  excuse  the  offender."  ^ 

§  553.  Importance  of  speedy  remedy  in  taxation. 

There  is  an  obvious  distinction  between  the  remedies  ap- 
propriate to  th§  construction  and  administration  of  tax 
laws  and  those  required  in  the  determination  of  the  validity 

1  Mechem  on  Public  Officers,  Sec.  690. 

2  Haffla  V.  Mason,  15  Wall.  671;  Hardin  v.  Honeback,  137  U.  S.  43. 
2  Amy  V.  Supervisors,  11  Wall.  136. 

4  In  Peoples.  Smith,  123  Cal.  70,  the  public  assessor  charged  with  the 
official  duty  of  collecting  poll  taxes  and  personal  property  taxes  was 
held,  under  the  doctrine  of  the  Amy  case,  to  be  responsible  upon  his 
official  bond  for  failure  to  perform  this  ministerial  duty. 

47 


738  MATTERS  OF  PROCEDURE.  §  553 

of  the  taxation,  that  is,  of  the  question  whether  the  power 
of  taxation  has  been  lawfully  exercised.  In  the  former  case 
it  is  right  and  proper  that  parties  should  be  remitted  to  the 
remedy  by  legal  action,  especially  when  an  adequate  remedy 
is  provided  by  payment  under  protest  aad  suit  to  recover,  as 
in  the  case  of  taxes  levied  by  Congress  and  in  some  of  the 
States,  as  provided  by  their  statutes.  While  it  is  true  that  the 
government  should  not  be  embarrassed  by  the  interruption 
of  the  collection  of  its  revenue  at  stated  periods,  it  is  also 
true  that,  when  the  validity  of  a  tax  is  involved,  the  public, 
as  well  as  the  private,  taxpaj^er  is  interested  in  the  speedy 
determination  of  the  question.  If  the  tax  is  invalid,  the 
government  should  know  it  as  soon  as  possible,  so  that  it 
may  provide  other  means  of  revenue ;  and  the  taxpayers 
should  also  know  it,  so  they  can  avoid  uncertainty  and  may 
promptly  discharge  what  is  lawfully  due. 

This  consideration  of  public  policy  was  forcibly  illus- 
trated in  the  Income  Tax  Cases,  where  the  public  interest 
demanding  a  speedy  determination  of  the  validity  of  the  tax 
really  forced  a  practical  evasion  of  the  provision  of  the 
Federal  statute  as  to  the  form  of  procedure.  The  truth 
is  that,  in  our  busy  industrial  life,  the  extension  of  pre- 
ventive remedies  is  demanded  of  a  progressive  jurispru- 
dence, and  in  no  department  of  the  law  is  this  so  clearly 
to  the  interest  both  of  the  public  and  the  private  litigant, 
as  in  questions  involving  the  validity  of  taxation.  This 
is  especially  true,  because  the  increasing  expenditures  of 
government  are  forcing  the  trial  of  new  and  experimental 
forms  of  taxation,  and  it  frequently  happens  of  recent 
years  that  test  cases  are  made  up  and  regular  forms  of 
procedure  waived  for  the  purpose  of  securing  speedy 
judicial  determination. 

It  is  reinarked  by  Mr.  High,  in  his  work  on  injunctions,^ 

1  1  High  on  Injunctions,  §  484. 


§  553  MATTERS  OF  PROCEDURE.  739 

that  in  no  branch  of  the  hiw  of  injunctions  has  there  been 
manifested  greater  apparent  want  of  harmony  in  the  decisions 
of  the  courts  than  in  the  exercise  of  the  restraint  on  the 
power  of  taxation,  and  that  it  is  difficult,  if  not  impossible, 
to  harmonize  completely  and  perfectly  the  principles, 
which  seem  to  have  the  weight  of  authority  in  their  sup- 
port, with  all  the  decided  cases.  In  the  courts  of  the 
United  States,  as  alreadj^  shown,  the  alleged  unconstitu- 
tionality of  a  tax  is  not  sufficient  ground  for  injunction, 
but  there  must  be  some  circumstances  bringing  the  case 
within  the  recognized  scope  of  equity  jurisdiction,  such  as 
a  threatened  cloud  upon  the  title  of  real  estate  or  a  multi- 
plicity of  suits.^ 

Much  has  been  said  in  judicial  opinions  of  the  public 
policy  which  forbids  judicial  interference  with  taxation, 
and  the  influence  upon  our  jurisprudence  of  the  ancient 
historic  jealousy  of  courts  of  chancery  is  illustrated  in  the 
opinions  of  eminent  judges.  Thus  in  some  States  where 
license  taxes  are  enforced  by  criminal  prosecutions  for 
doing  business  without  license,  this  mode  of  enforcement 
is  held  to  bar  injunctive  relief,  on  the  ground  that  such 
relief  would  be  enjoining  criminal  prosecutions;  and  in 
such  cases  parties  are  compelled  to  submit  to  a  criminal 
conviction  in  order  to  test  the  validity  of  the  tax,  there  being 
as  a  rule  no  right  of  appeal  except    from    a  conviction.^ 

1  Dows  V.  Chicago,  11  Wallace  109;  Union  Pacific  Railway  Co.  v. 
Cheyenne,  113  U.  S.  516. 

2  For  illustrative  cases  where  the  injunctive  remedy  was  denied  and 
the  determination  of  the  validity  of  a  tax  affecting  extensive  business 
interests  only  secured  through  criminal  prosecution,  see  State  ex  rel.  v. 
Wood,  155  Mo.  425;  State  u.  Bixman,  162  Mo.  1.  In  the  case  first  cited 
an  injunction  restraining  the  enforcement  of  the  tax  was  arrested  by  a 
writ  of  prohibition,  on  the  ground  that  the  Circuit  Court  had  no  juris- 
diction, because  the  bill  did  not  state  facts  sufficient  to  bring  the  case 
within  the  class  in  which  injunctions  may  be  granted;  while  in  the  other 
case  the  tax  Itself  was  declared  valid  by  a  vote  of  only  four  judges 
against  Ihree. 


740  MATTEES  OF  PROCEDURE.  §  553 

But  in  a  threatened  trespass  which  may  destroy  property, 
what  matters  it  that  the  trespasser  may  be  also  guilty  of  a 
crime?  The  injunction  restrains,  not  the  crime,  but  the 
irreparable  injury  to  property.  So,  in  the  case  of  annoy- 
ances to  business  by  threatened  criminal  prosecution 
enforcing  illegal  taxation,  the  jurisdiction  of  equity  would 
be  properly  invoked,  not  to  restrain  the  prosecutions  as 
such,  but  to  prevent  the  irreparable  injury  to  business  and 
property  from  the  attempted  enforcement  of  illegal 
exactions. 

The- fact  that  the  State  authorizes  the  payment  of  taxes 
under  protest  with  suit  to  recover  back,  under  the  same 
system  as  authorized  by  Congress  in  regard  to  Federal 
taxes,  has  been  held  of  itself  to  constitute  an  adequate 
remedy  at  law.  E  converso,  should  not  the  absence  of  such 
a  statutory  remedy  be  of  itself  a  basis  for  preventive  relief  ? 
Judge  Taft,  in  holding  that,  where  a  State  gives  a  remedy 
bv  injunction  against  the  assessment  and  collection  of  taxes 
on  the  ground  of  illegality,  such  statutory  remedy  may  be 
afforded  by  the  Federal  court  sitting  in  equity, ^  said  "  No 
one  can  doubt  that  the  remedy  by  enjoining  an  illegal  tax 
raises  in  the  most  summary  and  satisfactory  way  the  ques- 
tion of  the  illegality  of  the  tax,  and  relieves  the  taxpayer 
of  the  burden  of  paying  the  tax  or  waiting  the  slow  process 
of  a  civil  suit  by  the  State  to  recover  it  from  him." 

It  was  said  by  Chief  Justice  Marshall  in  Osborn  v.  Bank, 
that  the  single  act  of  levying  the  tax  in  the  first  instance 
is  the  cause  of  an  action  at  law,  but  this  affords  a  remedy 
only  for  the  single  act,  and  is  not  equal  to  the  remedy  in 
chancery  which  prevents  a  repetition  and  protects  the 
privilege. 

The  Supreme  Coui:tof  Massachusetts  said :  2  "  The  power 


1  See  §  530. 

2  Freeland  v.  Hastings,  10  Allen,  570,  575. 


§    553  MATTERS  OF  PROCEDURE.  741 

to  raise  and  assess  taxes,  although  essential  and  necessary 
to  the  maintenance  and  support  of  civil  government,  is  to 
be  exercised  with  care,  and  to  be  kept  strictly  within  the 
limits  imposed  by  law.  It  is  the  clear  right  of  every 
citizen  to  insist  that  no  unlawful  or  unauthorized  exaction 
shall  be  made  upon  him  under  the  guise  of  taxation.  If 
any  such  illegal  encroachment  is  attempted,  he  can  always 
invoke  the  aid  of  the  judicial  tribunals  for  his  protection, 
and  prevent  his  money  or  other  property  from  being  taken 
and  appropriated  for  a  purpose  or  in  a  manner  not  author- 
ized by  the  Constitution  and  laws.  The  legislature  of 
this  commonwealth  have  provided  a  speedy  and  effectual 
remedy  against  the  danger  of  illegal  assessment  b}^  towns  and 
cities,  and  the  unauthorized  expenditure  by  them  of  money 
raised  by  taxation.  Under  the  provisions  of  Gen.  Stats. 
c.  18,  Sec.  79,  immediate  resort  can  be  had  by  a  suit  or 
petition  to  this  court,  sitting  in  equity,  to  hear  and  decide 
concerning  the  validity  of  a  proposed  tax  or  the  right 
to  pay  money  from  the  treasury  of  a  town,  and  any  viola- 
tion or  abuse  of  the  legal  right  and  power  of  raising  taxes 
and  assessing  them  on  the  inhabitants,  as  well  as  of  expend- 
ing money  belonging  to  a  city  or  town,  can  be  effectually 
restrained  and  prevented  by  injunction." 

The  principle  thus  declared  should  be  applied  to  every 
form  of  taxation,  whether  State  or  municipal.  The  public 
as  well  as  private  interests  will  be  best  subserved  by  the 
speediest  possible  determination,  through  the  preventive 
jurisdiction  of  a  court  of  equity,  or  by  special  statutory 
procedure,  properly  regulated  to  protect  the  public  inter- 
ests, in  every  case  where  is  involved  the  validity  of  an  ex- 
action from  persons,  property  or  business  under  the  taxing 
power. 


APPENDIX. 


CONSTITUTION    OF     THE    UNITED     STATES    OF 

AMERICA. 

Preamble.  — We,  the  people  of  the  United  States,  in  order  to  form  a 
more  perfect  union,  establish  justice,  insure  domestic  tranquillity,  pro- 
vide for  the  common  defense,  promote  the  general  welfare,  and  secure 
the  blessings  of  liberty  to  ourselves  and  our  posterity,  do  ordain  and 
establish  this  Constitution  for  the  United  States  of  America. 

ARTICLE  I. 

OF   THE   LEGISLATIVE   POWER. 

Section  1.  Legislative  power,  where  vested.—  All  legislative  pow- 
ers herein  granted  shall  be  vested  in  a  Congress  of  the  United  States, 
which  shall  consist  of  a  Senate  and  House  of  Representatives. 

Sec.  2.  House  of  Represesentatives,  how  and  by  whom  chosen.  — 

The  House  of  Representatives  shall  be  composed  of  members  chosen 
every  second  year  by  the  people  of  the  several  States,  and  the  electors  in 
each  State  shall  have  the  qualifications  requisite  for  electors  of  the  most 
numerous  branch  of  the  State  legislature. 

Qnaliflcation  of  representative.  —  No  person  shall  be  a  representa- 
tive who  shall  not  have  attained  to  the  age  of  twenty-five  years  and  been 
seven  years  a  citizen  of  the  United  States,  and  who  shall  not,  when 
elected,  be  an  inhabitant  of  that  State  in  which  he  shall  be  chosen. 

Apportionment  of   representatives  and  direct  tJixes —Censns.— 

[Representatives  and  direct  taxes  shall  be  apportioned  among  the  several 
States  which  may  be  included  within  this  Union,  according  to  their 
respective  numbers,  which  shall  be  determined  by  adding  to  the  whole 
number  of  free  persons,  including  those  bound  to  service  for  a  term 
of  years,  and  excluding  Indians  not  taxed,  three -fifths  of  all  other 
persons.]*  The  actual  enumeration  shall  be  made  within  three  years 
after  the  first  meeting  of  the  Congress  of  the  United  States,  and  within 
every  subsequent  term  of  tea  years,  in  such  manner  as  they  shall  by 
law  direct.  The  number  of  representatives  shall  not  exceed  one  for 
every  thirty  thousand,  but  each  State  shall  have  at  least  one  repre- 
sentative; and  until  such  enumeration  shall  be  made,  the  State  of  New 
Hampshire  shall  be  entitled  to  choose  three,  Massachusetts  eight, 
Rhode   Island  and  Providence  Plantations    one,  Connecticut  five,  New 

*  Clause  in  brackets  Is  amended  by  Fourteenth  Amendment,  sec.  2,  infra. 

(745) 


746  APPENDIX. 

York  six,  New  Jersey  four,  Pennsylvania  eight,  Delaware  one,  Mary- 
land six,  Virginia  ten,  North  Carolina  five,  South  Carolina  five,  and 
Georgia  three. 

Vacancies  in  House  of  Representatives.  —  When  vacancies  happen 
in  the  representation  from  any  State,  the  executive  authority  thereof 
shall  issue  writs  of  election  to  fill  such  vacancies. 

Speaker  and  officers  of  Honse— Impeachment— The  House  of 
Representatives  shall  choose  their  j-peaker  and  other  officers;  and  shall 
have  the  sole  power  of  impeachment. 

Sbc.  3.  Senators—  Election  and  term  of.  — The  Senate  of  the  United 
States  shall  be  composed  of  two  senators  from  each  State,  chosen  by 
the  legislature  thereof,  for  sis  years;  and  each  senator  shall  have  one 
vote. 

Division  into  classes— Tacancies  —  Qnaliflcations. —Immediately 
after  they  shall  be  assembled  in  consequence  of  the  first  election,  they 
shall  be  divided  as  equally  as  may  be  into  three  classes.  The  seats  of 
the  senators  of  the  fir&t  class  shall  be  vacated  at  the  expiration  of  the 
second  year,  of  the  second  class  at  the  expiration  of  the  fourth  year, 
and  of  the  third  class  at  the  expiration  of  the  sixth  year,  so  that  one- 
third  may  be  chosen  every  second  year;  and  if  vacancies  happen  by  resig- 
nation, or  otherwise,  during  the  recess  of  the  h  gislature  of  any  State, 
the  executive  thereof  may  make  temporary  appointments  until  the  next 
meeting  of  the  legislature,  which  shall  then  fill  such  vacancies.  No 
person  shall  be  a  senator  who  shall  not  have  attained  to  the  age  of 
thirty  years,  and  been  nine  years  a  citizen  of  the  United  States,  and  who 
shall  not,  when  elected,  be  an  inhabitant  of  that  State  from  which  he 
shall  be  chosen. 

Vice-President.  —  The  Vice-President  of  the  United  States  shall  be 
president  of  the  Senate,  but  shall  have  no  vote,  unless  they  be  equally 
divided. 

President  pro  tern,  and  other  officers  of  Senate.  — The  Senate  shall 
choose  their  other  officers,  and  also  a  president  pro  tempore,  in  the  ab- 
sence of  the  Vice-President,  or  when  he  shall  exercise  the  office  of 
President    of  the  United  States. 

Impeachment,  power  to  try.  — Presiding  officer  on  trial.  — The 

Senate  shall  have  the  sole  power  to  try  all  impeachments.  When 
silting  for  that  purpose,  they  shall  be  on  oath  or  affirmation.  When  the 
President  of  the  United  States  is  tried,  the  Chief  Justice  shall  preside; 
and  no  person  shall  be  convicted  without  the  concurrence  of  two-thirds 
of  the  members  present. 

Judgment  on  impeachment.  — Judgment  in  cases  of  impeachment 
shall  not  extend  further  than  to  removal  from  office,  and  disqualifica- 
tion to  hold  and  enjoy  any    office  of  honor,  trust  or  profit  under  the 


APPENDIX.  747 

United  States;  but  the  party  convicted  shall  nevertheless  be  liable  and 
subject  to  indictment,  trial,  judgment  and  punishment,  according  to  law. 

Sec.  4.  Election  of  senators  and  representatives — Sessions  of 
Congress, —  The  times,  places  and  manner  of  holding  elections  for 
senators  and  representatives  shall  be  prescribed  in  each  State  by  the  leg- 
islature thereof;  bufthe Congress  may  at  any  time,  by  law,  make  or  alter 
such  regulations,  except  as  to  the  places  of  choosing  senators.  The  Con- 
gress shall  assemble  at  least  once  in  every  year,  and  such  meeting  shall 
be  on  the  first  Monday  in  December,  unless  they  shall,  by  law,  appoint 
a  different  day. 

Sec.  5.  Qualification  of  members—  Jadge  of,  qnornm.  —  Each  house 
shall  be  the  judge  of  the  elections,  returns  and  qualifications  of  its  own 
members,  and  a  majority  of  each  shall  constitute  a  quorum  to  do  business ; 
but  a  smaller  number  may  adjourn  from  day  to  day,  and  may  be  author- 
ized to  compel  the  attendance  of  absent  members,  in  such  manner  and 
under  such  penalties  as  each  house  may  provide. 

Rales  of  proceedings  —  Contempts,  expulsions.  —  Each  house  may 
determine  the  rules  of  its  proceedings,  punish  its  members  for  disorderly 
behavior,  and,  with  the  concurrence  of  two-thirds,  expel  a  member. 

Jonrnals  —  Yeas  and  nays.  —  Each  house  shall  keep  a  journal  of  its 
proceedings,  and  from  time  to  time  publish  the  same,  excepting  such  parts 
as  may  In  their  judgment  require  secrecy;  and  the  yeas  and  nays  of  the 
members  of  either  house  on  any  question  shall,  at  the  desire  of  one-fifth 
of  those  present,  be  entered  on  the  journal. 

Adjournments.  —  Neither  house,  during  the  session  of  Congress,  shall, 
without  the  consent  of  the  other,  adjourn  for  more  than  three  days,  nor 
to  any  other  place  than  that  in  which  the  two  houses  shall  be  sitting. 

Sec.  6.  Compensation  of  members  — Privileges,  — The  senators  and 

representatives  shall  receive  a  compensation  for  their  services,  to  be  ascer- 
tained by  law,  and  paid  out  of  the  treasury  of  the  United  States.  They 
shall,  in  all  cases,  except  treason,  felony  and  breach  of  the  peace,  be 
privileged  from  arrest  during  their  attendance  at  the  session  of  their 
respective  houses,  and  in  going  to  and  returning  from  the  same;  and  for 
any  speech  or  debate  in  either  house,  they  shall  not  be  questioned  in  any 
other  place. 

Ineligibility  to  office.  —  No  senator  or  representative  shall,  during 
the  time  for  which  he  was  elected,  be  appointed  to  any  civil  office  under 
the  authority  of  the  United  States,  which  shall  have  been  created,  or  the 
emoluments  whereof  shall  have  been  increased,  during  such  time;  and 
no  person  holding  any  oflice  under  the  United  States  shall  be  a  member 
of  either  house  during  his  continuance  in  ofiice. 

Sec.  7.  Revenue  bills  — Where  to  originsite.  —  All  bills  for  raising 


748  APPENDIX. 

revenue  shall  originate  in  the  House  of  Representatives;  but  the  Senate 
may  propose  or  concur  with  amendments  as  on  other  bills. 

Bills,  approval  of  President  —  Veto,  proceedings  thereon.  — Every 

bill  which  shall  liave  passed  the  House  of  Representatives  aad  the  Senate 
shall,  before  it  become  a  law,  be  presented  to  the  President  of  the  United 
States;  if  he  approve  he  shall  sign  it,  but  if  not  he  shall  return  it  with 
his  objections  to  that  house  in  which  it  shall  have  originated,  who  shall 
enter  the  objections  at  large  on  their  journal,  and  proceed  to  reconsider  it. 
If  after  such  reconsideration  Lwo-thirds  of  thathouse  shall  agree  to  pass 
the  bill,  it  shall  be  sent,  together  with  the  objections,  to  the  other  house, 
by  which  it  shall  likewise  be  reconsidered,  and  if  approved  by  two-thirds 
of  that  house,  it  shall  become  a  law.  But  in  all  such  cases  the  voles  of 
both  houses  shall  be  determined  by  yeas  and  nays,  and  the  names  of  the 
persons  voting  for  and  against  the  bill  shall  be  entered  on  the  journal  of 
each  house  respectively.  H  any  bill  shall  not  be  returned  by  the  Presi- 
dent within  ten  days  (Sundays  excepted)  after  it  shall  have  been  pre- 
sented to  him,  the  same  shall  be  a  law,  ia  like  manner  as  if  he  had  signed 
it,  unless  the  Congress  by  their  adjournment  prevent  its  return,  in  which 
case  it  shall  not  be  a  law. 

Orders,  resolutions  and  votes  —  President's  approval,  veto.—  Every 
order,  resolution  or  vote  to  which  the  concurrence  of  the  Senate  and 
House  of  Representatives  may  be  necessary  (except  on  a  question  of  ad- 
journment) shall  be  presented  to  the  President  of  the  United  States, 
and,  before  the  same  shall  take  effect,  shall  be  approved  by  him,  or, . 
being  disapproved  by  him,  shall  be  repassed  by  two-thirds  of  the  Senate 
and  House  of  Representatives,  according  to  the  rules  and  limitations 
prescribed  in  the  case  of  a  bill. 

Sec.  8.  Powers  of  Congress.  — The  Congress  shall  have  power: 

To  lay  and  collect  taxes,  duties,  imposts  and  excises,  to  pay  the 
debts  and  provide  for  the  common  defense  and  general  welfare  of 
the  United  States;  but  all  duties,  imposts  and  excises  shall  be  uni- 
form throughout  the  United  States; 

To  borrow  money  on  the  credit  of  the  United  States; 

To  regulate  commerce  with  foreign  nations,  and  among  the  several 
States,  and  with  the  Indian  tribes ; 

To  establish  an  uniform  rule  of  naturalization,  and  uniform  laws 
on  the  subject  of  bankruptcies  throughout  the  United  States; 

To  coin  money,  regulate  the  value  thereof,  and  of  foreign  coin,  and 
fix  the  standard  of  weights  and  measures; 

To  provide  for  the  punishment  of  counterfeiting  the  securities  and 
current  coin  of  the  United  States; 

To  establish  post  ofSces  and  post  roads ; 

To  promote  the  progress  of  science  and  useful  arts,  by  securing 
for  limited  times  to  authors  and  inventors  the  exclusive  right  to 
their  respective  writings  and  discoveries; 


APPENDIX.  749 

To  constitute  tribunals  inferior  to  the  Supreme  Court; 

To  define  and  punish  piracies  and  felonies  committed   on  the  high 

seas,  and  offenses  against  the  law  of  nations; 
To  declare  war,   grant  letters  of  marque  and  reprisal,  and  make 

rules  concerning  captures  on  land  and  water; 
To  raise  and  support  armies,  but  no  appropriation  of  money  to  that 

use  shall  be  for  a  longer  term  than  two  years; 
To  provide  aud  maintain  a  navy ; 
To  make  rules  for  the  government  and  regulation  of  the  land  and 

naval  forces ; 
To  provide  for  calling  forth  the  militia  to  execute  the  laws  of  the 

Union,  suppress  insurrections  and  repel  invasions; 
To  provide  for  organizing,  arming  and  disciplining  the  militia,  and 
for  governing  such  part  of  them  as  may  be  employed  in  the  service 
of  the  United  States,  reserving  to  the  States  respectively  the  ap- 
pointment of  the  ofBcers,  and  the  authority  of  training  the  militia 
according  to  the  discipline  prescribed  by  Congress; 
To  exercise  exclusive  legislation,  in  all  cases  whatsoever,  over  such 
district  (not  exceeding  ten  miles  square)  as  may,  by  cession  of 
particular  Stales,  and  the  acceptance  of  Congress,  become  the  seat 
of  government  of  the  United  States,  and  to  execute  like  authority 
over  all  places  purchased  by  the  consent  of  the  legislature  of  the 
State  in  which  the  same  shall  be,  for  the  erection  of  forts,  maga- 
zines, arsenals,  dock  yards,  and  other  needful  buildings;  and 
To  make  all  laws  which  shall  be  necessary  and  proper  for  carrying 
into  execution  the  foregoing  powers,  and  ail  other  powers  vested 
by  this  Constitution  in  the  government  of  the  United  States,  or  in 
any  department  or  officer  thereof. 

Sec.  9.  Migration  and  importation  of  persons.  —  The  migration  or 
importation  of  such  persons  as  any  of  the  Slates  now  existing  shall 
think  proper  to  admit,  shall  not  be  prohibited  by  the  Congress  prior  to  the 
year  one  thousand  eight  hundred  and  eight,  but  a  tax  or  duty  may  be 
imposed  on  such  importation  not  exceeding  ten  dollars  for  each  person. 

Writ  of  liabeas  corpus.  — The  privilege  of  the  writ  of  habeas  corpus 
shall  not  be  suspended  unless  when  in  cases  of  rebellion  or  invasion  the 
public  safety  may  require  it. 

Bills  of  attainder  and  ex  post  facto  laws.— No  bill  of  attainder  or 

ex  post  facto  law  shall  be  passed. 

Capitation  and  direct  taxes.  —  No  capitation  or  other  direct  tax  shall 
be  laid,  unless  in  proportion  to  the  census  or  enumeration  herein  before 
directed  to  be  taken. 

Taxation  on  exports  —  Commercial  regulations.  —  No  tar  or  duly 
shall  be  laid  on  articles  exported  from  any  State.  No  preference  shall 
be  given  by  any  regulation  of  commerce  or  revenue  to  the  ports  of  one 


750  APPENDIX. 

State  over  those  of  another;  nor  shall  vessels  bound  to  or  from  one  State 
be  obliged  to  enter,  clear  or  pay  duties  in  another. 

Appropriations  of  pablic  money  —  Accounts.  —  No  money  shall  be 
draTvn  from  the  treasury  but  in  consequence  of  appropriatious  made  by 
law;  aud  a  regular  statement  and  account  of  the  receipts  and  expendi- 
tures of  all  public  money  shall  be  published  from  time  to  time. 

Titles  of  nobility  —  Presents,  etc.,  to  officers.  —  No  title  of  nobility 
shall  be  granted  by  the  United  States;  and  no  person  holding  any  ofHce 
of  profit  or  trust  under  them  shall,  without  the  consent  of  the  Congress, 
accept  of  any  present,  emolument,  office  or  title,  of  any  kind  whatever, 
from  any  king,  prince  or  foreign  State. 

Sec.  10.  No  State  shall  enter  into  any  treaty,  alliance  or  confederation ; 
grant  letters  of  marque  and  reprisal;  coin  money;  emit  bills  of  credit; 
make  anything  but  gold  and  silver  coin  a  tender  in  payment  of  debts; 
pass  any  bill  of  attainder,  ex  post  facto  law,  or  law  impairing  the  obliga- 
tion of  contracts,  or  grant  any  title  of  nobility. 

No  State  shall,  without  the  consent  of  the  Congress,  lay  any  imposts 
or  duties  on  imports  or  exports,  except  what  may  be  absolutely  neces- 
sary for  executing  its  inspection  laws ;  and  the  net  produce  of  all  duties 
and  imposts  laid  by  any  State  on  imports  or  exports  shall  be  for  the  use 
of  the  treasury  of  the  United  States;  and  all  such  laws  shall  be  subject 
to  the  revision  and  control  of  the  Congress. 

No  State  shall,  without  the  consent  of  Congress,  lay  any  duty  of  tonnage, 
keep  troops  or  ships  of  war  in  time  of  peace,  enter  into  any  agreement 
or  compact  with  another  State,  or  with  a  foreign  power,  or  engage  in 
war,  unless  actually  invaded,  or  in  such  imminent  danger  as  will  not 
admit  of  delay. 

ARTICLE  II. 

OF    THE   EXECUTIVE. 

Section  1.  President  and  Vice-President  —  Term  of  ofiSce,  election 

of.  —  The  executive  power  shall  be  vested  in  a  President  of  the  United 
States  of  America.  He  shall  hold  his  office  during  the  term  of  four  years, 
and,  together  with  the  Vice-President,  chosen  for  the  same  time,  be 
elected  as  follows : 

Each  State  shall  appoint,  in  such  manner  as  the  legislature  thereof 
may  direct,  a  number  of  electors,  equal  to  the  whole  number  of  senators 
and  representatives  to  which  the  State  may  be  entitled  in  the  Congress; 
but  no  senator  or  representative,  or  person  holding  an  office  of  trust  or 
profit  under  the  United  States,  shall  be  appointed  an  elector. 


APPENDIX.  751 

[The  electors  shall  meet  In  their  respective  States,  and  vote  by  ballot  for  two 
persons,  of  whom  one  at  least  shall  not  be  an  Inhabitant  of  the  same  State  witti 
themselves.  And  they  shall  make  a  list  of  all  the  persons  voted  for,  and  of  the 
number  of  votes  for  each;  which  list  they  shall  sign  and  certify,  and  transmit 
sealed  to  the  seat  of  government  of  the  United  States,  directed  to  the  President  of 
the  Senate.  The  President  of  the  Senate  shall,  in  the  presence  of  the  Senate  and 
House  of  Representatives,  open  all  the  certificates,  and  the  votes  shall  then  be 
counted.  The  person  having  the  greatest  number  of  votes  shall  be  the  President, 
If  such  number  be  a  majority  of  the  whole  number  of  electors  appointed ;  and  if 
there  be  more  than  one  who  have  such  majority,  and  have  an  equal  number  of 
votes,  then  the  House  of  Representatives  shall  immediately  choose  by  ballot  one  of 
them  for  President;  and  if  no  person  have  a  majority,  then  from  the  five  highest 
on  the  list,  the  said  House  shall  In  like  manner  choose  the  President.  But  in 
clioosing  the  President,  the  votes  shall  be  taken  by  States,  the  representation 
from  each  State  having  one  vote;  a  quorum  for  this  purpose  shall  consist  of  a 
member  or  members  from  two-thirds  of  the  States,  and  a  majority  of  all  the  States 
shall  be  necesary  to  a  choice.  In  every  case,  after  the  choice  of  the  President,  the 
person  having  the  greatest  number  of  votes  of  the  electors  shall  be  the  Vice-Presi- 
dent. But  If  there  should  remain  two  or  more  who  have  equal  votes,  the  Senate 
shall  choose  from  them  by  ballot  the  Vice-President.]* 

Time  of  choosiug  electors. —  The  Congress  may  determine  the  time 
of  choosing  the  electors,  and  the  day  on  which  they  shall  give  their 
votes;  which  day  shall  be  the  same  throughout  the  United  States. 

President's  qualifications.  —  No  person,  except  a  natural  born  citi- 
zen, or  a  citizen  of  the  United  States  at  the  time  of  the  adoption  of  this 
Constitution,  shall  be  eligible  to  the  office  of  President;  neither  shall 
any  person  be  eligible  to  that  office  who  shall  not  have  attained  to  the 
age  of  thirty-five  years,  and  been  fourteen  years  a  resident  within  the 
United  States. 

Vacancy  in  office  of  President.  —  In  case  of  the  removal  of  the 
President  from  office,  or  of  his  death,  resignation,  or  inability  to  dis- 
charge the  powers  and  duties  of  the  said  office,  the  same  shall  devolve 
on  the  Vice-President,  and  the  Congress  may,  by  law,  provide  for  the 
case  of  removal,  death,  resignation,  or  inability,  both  of  the  President 
and  Vice-President,  declaring  what  officer  shall  then  act  as  President, 
and  such  officer  shall  act  accordingly,  until  the  disability  be  removed,  or  a 
President  shall  be  elected.  The  President  shall,  at  stated  times,  receive  for 
his  services  a  compensation,  which  shall  neither  be  increased  nor  dimin- 
ished, during  the  period  for  which  he  shall  have  been  elected,  and  he 
shall  not  receive  within  that  period  any  other  emolument  from  the  United 
States,  or  any  of  them. 

Oath  of.  —  Before  he  enter  on  the  execution  of  his  office,  he  shall  take 
the  following  oath  or  affirmation :  — 

"  I  do  solemnly  swear  (or  affirm)  that  I  will  faithfully  execute  the  office 
of  President  of  the  United  States,  and  will,  to  the  best  of  my  ability, 
preserve,  protect  and  defend  the  Constitution  of  the  United  States." 

*  Clause  in  brackets  amended  by  Twelfth  Amendment,  infra. 


752  APPENDIX. 

Sec.  2.  Powers  and  dnties  of  President.  — The  President  shall  be 
commander-in-chief  of  the  army  and  navy  of  the  United  States,  and  of 
the  militia  of  the  several  Stales,  when  called  into  the  actual  service  of 
the  United  States;  he  may  require  the  opinion,  in  writing,  of  the  prin- 
cipal officer  in  each  of  the  executive  departments,  upon  any  subject  re- 
lating to  the  duties  of  their  respective  rfflces,  and  he  shall  have  power  to 
grant  reprieves  and  pardons  for  offenses  against  the  United  Slates, 
except  in  cases  of  impeachment.  He  shall  have  power,  by  and  with  the 
advice  and  consent  of  the  Senate,  to  make  treaties,  provided  two-thirds 
of  the  senators  present  concur;  and  he  shall  nominate,  and,  by  and  with 
the  advice  and  consent  of  the  Senate,  shall  appoint  ambassadors,  other 
public  ministers  and  consuls,  judges  of  the  Supreme  Court,  and  all  other 
officers  of  the  United  States  whose  appointments  are  not  herein  other- 
wise provided  for,  and  which  shall  be  established  by  law;  but  the  Con- 
gress may,  by  law,  vest  the  appointment  of  such  inferior  officers,  as  they 
think  proper,  in  the  President  alone,  in  the  courts  of  law,  or  in  the  heads 
of  departments. 

Vacancies  in  office.  — The  President  shall  have  power  to  fill  up  all 
vacancies  that  may  happen  during  the  recess  of  the  Seuale,  by  granting 
commissions,  which  shall  expire- at  the  end  of  their  next  session. 

Sec.  3.  Powers  and  duties  of  President  continued.  —  He  shall,  from 
time  to  time,  give  to  the  Congress  information  of  the  state  of  the  Union, 
and  recommend  to  their  consideration  such  measures  as  he  shall  judge 
necessary  and  expedient;  he  may,  on  extraordinary  occasions,  convene 
both  houses,  or  either  of  them,  and  in  case  of  disagreement  between 
them,  with  respect  to  the  time  of  adjournment,  he  may  adjourn  them  to 
such  time  as  he  shall  think  proper;  he  shall  receive  ambassadors  and 
other  public  ministers;  he  shall  take  care  that  the  laws  be  faithfully 
executed,  and  shall  commission  all  the  officers  of  the  United  States. 

Sec.  4.  Conviction  of  treason,  etc. —The  President,  Vice-Presi- 
dent, and  all  civil  officers  of  the  United  States,  shall  be  removed  from 
office  on  impeachment  for  and  conviction  of  treason,  bribery,  or  other 
high  crimes  and  misdemeanors. 

ARTICLE  III. 

OF   THE    JUDICIARY. 

Section  1.  Judicial  power  —Judges —Compensation  — Tenure  of 

office. —  The  judicial  power  of  the  United  Slates  shall  be  vested  in  one 
Supreme  Court,  and  in  such  inferior  courts  as  the  Congress  may  from 
time  to  time  ordain  and  establish.  The  judges,  both  of  the  Supreme 
and  inferior  courts,  shall  hold  their  offices  during  good  behavior,  and 
shall,  at  stated  times,  receive  for  their  services  a  compensation,  which 
shall  not  be  diminished  during  their  continuance  in  office. 


APPENDIX.  753 

Sec.  2.  Judicial  power  — Extends  to  what— Supreme  Court,  jaris- 
diction  of. —  The  judicial  power  shall  extend  to  all  cases,  ia  law  and 
equity,  arising  under  this  Constitution,  the  laws  of  the  United  States, 
and  treaties  made  or  which  shall  be  made  under  their  authority;  to  all 
cases  affecting  ambassadors,  other  public  ministers,  and  consuls;  to 
all  cases  of  admiralty  and  maritime  jurisdiction;  to  controversies  to 
which  the  United  Slates  shall  be  a  party;  to  controversies  between  two 
or  more  States;  between  a  State  and  citizens  of  another  State; 
between  citizens  of  different  States;  between  citizens  of  the  same 
State  claiming  lands  under  grants  of  different  States,  and  between  a 
State,  or  the  citizens  thereof,  and  foreign  States,  citizens  or  subjects. 

In  all  cases  affecting  ambassadors,  other  public  ministers  and  consuls, 
and  those  in  which  a  State  shall  be  party,  the  Supreme  Court  shall 
have  original  jurisdiction.  In  all  the  other  cases  before  mentioned  the 
Supreme  Court  shall  have  appellate  jurisdiction,  both  as  to  law  and 
fact,  with  such  exceptions  and  under  such  regulations  as  the  Congress 
shall  make. 

The  trial  of  all  crimes,  except  in  cases  of  impeachment,  shall  be  by 
jury;  and  such  trial  shall  be  held  in  the  State  where  the  said  crimes 
shall  have  been  committed;  but  when  not  committed  within  any  State, 
the  trial  shall  be  at  such  place  or  places  as  the  Congress  may  by  law 
have  directed. 

Sec.  3.  Treason  against  the  United  States.  — Treason  against  the 
United  States  shall  consist  only  in  levying  war  against  them,  or  in 
adhering  to  their  enemies,  giving  them  aid  and  comfort.  No  person 
shall  be  convicted  of  treason  unless  on  the  testimony  of  two  witnesses 
to  the  same  overt  act,  or  on  confession  in  open  court. 

The  Congress  shall  have  power  to  declare  the  punishment  of  treason, 
but  no  attainder  of  treason  shall  work  corruption  of  blood,  or  forfeiture 
except  during  the  life  of  the  person  attainted. 

ARTICLE  IV. 

MISCELLANEOUS  PROVISIONS. 

Section  1.— Records  and  judicial  proceedings  of  sister  States. — 

Full  faith  and  credit  shall  be  given  in  each  State  to  the  public  acts, 
records  and  judicial  proceedings  of  every  other  State.  And  the  Con- 
gress may  by  general  laws  prescribe  the  manner  in  which  such  acts, 
records  and  proceedings  shall  be  proved,  and  the  effect  thereof. 

Sec.  2.  Privileges     and   immunities   of    citizens  of   the    several 

'States.- The  citizens  of  each  State  shall  be  entitled  to  all  privileges 
and  immunities  of  citizens  in  the  several  States. 

48 


754  APPENDIX. 

Fngitiyes  from  justice.  —  A  person  charged  in  any  State  with  treason, 
felony  or  other  crime,  who  shall  flee  from  justice  and  be  found  in  another 
State,  shall,  on  demand  of  the  executive  authority  of  the  State  from 
which  he  fled,  be  delivered  up  to  be  removed  to  the  State  having  juris- 
diction of  the  crime. 

Fugitives  from  service  or  labor.  — No  person  held  to  service  or 
labor  in  one  State,  under  the  laws  thereof,  escaping  into  another,  shall, 
in  consequence  of  any  law  or  regulation  therein,  be  discharged  from 
such  service  or  labor,  but  shall  be  delivered  up  on  claim  of  the  party  to 
whom  such  service  or  labor  may  be  due. 

Sec.  3.  Admission  of  new  States. —New  States  may  be  admitted  by 
the  Congress  into  this  Union ;  but  no  new  State  shall  be  formed  or 
erected  within  the  jurisdiction  of  any  other  State,  nor  any  State  be 
formed  by  the  junction  of  two  or  more  States  or  parts  of  States,  without 
the  consent  of  the  legislatures  of  the  States  concerned  as  well  as  of  the 
Congress. 

Government  of  United  States  — Territory. and  property.  — The  Con- 
gress shall  have  power  to  dispose  of  and  make  all  needful  rules  and 
regulations  respecting  the  territory  or  other  property  belonging  to  the 
United  States;  and  nothing  in  this  Constitution  shall  be  so  construed  as 
to  prejudice  any  claims  of  the  United  States  or  of  any  particular  State. 

Sec.  4.  Guaranty  to  eacli  State  of  a  republican  form  of  govern- 
ment.—  The  United  States  shall  guarantee  to  every  State  in  this  Union 
a  republican  form  of  government,  and  shall  protect  each  of  them  against 
invasion,  and,  on  application  of  the  legislature  or  of  the  executive  (when 
the  legislature  cannot  be  convened),  against  domestic  violence. 

ARTICLE  V. 

Amendments  to  Constitution.  —  The  Congress,  whenever  two-thirds 
of  both  houses  shall  deem  it  necessary,  shall  propose  amendments  to 
this  Constitution,  or,  on  application  of  the  legislatures  of  two-thirds  of 
the  several  States,  shall  call  a  convention  for  proposing  amendments, 
which  in  either  case  shall  be  valid  to  all  intents  and  purposes  as  part 
of  this  Constitution,  when  ratified  by  the  legislatures  of  three -fourths  of 
the  several  States,  or  by  conventions  in  three-fourths  thereof,  as  one  or 
the  other  mode  of  ratification  may  be  proposed  by  the  Congress :  Pro- 
vided, That  no  amendment  which  may  be  made  prior  to  the  year  one 
thousand  eight  hundred  and  eight  shall  in  any  manner  aflEect  the  first 
and  fourth  clauses  in  the  ninth  section  of  the  first  article ;  and  that  no 
State,  without  its  consent,  shall  be  deprived  of  its  equal  suffrage  in  the 
Senate. 

ARTICLE  VI. 

Debts  prior  to  adoption  of  Constitution.  — All  debts  contracted 
and  engagements  entered  into  before  the  adoption  of  this  Constitution 


APPENDIX.  755 

shall  be  as  valid  against  the  United  States  under  this  Constitution  as 
under  the  confederation. 

Supreme  law  of  the  land.  — This  Constitution  and  the  laws  of  the 
United  States  which  shall  be  made  in  pursuance  thereof,  and  all  treaties 
made  or  which  shall  be  made  under  the  authority  of  the  United  States, 
shall  be  the  supreme  law  of  the  land;  and  the  judges  in  every  State  shall 
be  bound  thereby,  anything  in  the  constitution  or  laws  of  any  State  to 
the  contrary  notwithstanding. 

Oath  to  support  Constitution  of  United  States  —  No  religious 
test  for  United  States  office.  —  The  senators  and  representatives  be- 
fore mentioned,  and  the  members  of  the  several  State  legislatures^  and- 
all  executive  and  judicial  officers,  both  of  the  United  States  and  of  the 
several  States,  shall  be  bound,  by  oath  or  aflSrmation,  to  support  this 
Constitution;  but  no  religious  test  shall  ever  be  required  as  a  qualifica- 
tion to  any  office  or  public  trust  under  the  United  States. 

ARTICLE  VII. 

Ratification  of  Constitution,  —  The  ratification  of  the  conventions  of 
nine  States  shall  be  sufficient  for  the  establishment  of  this  Constitution 
between  the  States  so  ratifying  the  same. 

Done  in  convention,  by  the  unanimous  consent  of  the  States  present, 
the  seventeenth  day  of  September,  in  the  year  of  our  Lord  one  thousand 
seven  hundred  and  eighty-seven,  and  of  the  Independence  of  the  United 
Slates  of  America,  the  twelfth.  In  witness  whereof,  we  have  hereunto 
subscribed  our  names. 

GEORGE  WASHINGTON,  President. 

Attest:  William  Jackson,  Secretary. 


AMENDMENTS  TO  THE  CONSTITUTION. 

PROPOSED  BY  CONGRESS,  AND  RATIFIED  BY  THE  LEGISLATURES  OF  THE 
SEVERAL  STATES,  PURSUANT  TO  THE  FIFTH  ARTICLE  OF  THE 
ORIGINAL    CONSTITUTION. 

ARTICLE  I.  • 

Religiousliberty  — Freedom  of  speech  — Right  of  petition.- Con- 
gress shall  make  no  law  respecting  an  establishment  of  religion,  or  pro- 
hibiting the  free  exercise  thereof;  or  abridging  the  freedom  of  speech, 
or  of  the  press,  or  the  right  of  the  people  peaceably  to  assemble,  and  to 
petition  the  government  for  a  redress  of  grievances. 


756  APPENDIX. 

ARTICLE  II. 

Right  to  bear  arms.  —  A  well-regulated  militia  being  necessary  to 
the  security  of  a  free  State,  the  right  of  the  people  to  keep  and  bear 
arms  shall  not  be  infringed. 

ARTICLE  III. 

Qnartering  of  soldiers.  —  No  soldier  shall,  in  time  of  peace,  be  quar- 
tered in  any  house  without  the  consent  of  the  owner,  nor  in  time  of  war 
but  in  a  manner  prescribed  by  law. 

ARTICLE  IV. 

Unreasonable  searches,  seizures,  etc.,  prohibited.  —  The  right  of 
the  people  to  be  secure  in  their  persons,  houses,  papers  and  effects 
against  unreasonable  searches  and  seizures  shall  not  be  violated,  and  no 
warrants  shall  issue  but  upon  probable  cause,  supported  by  oath  or 
affirmation,  and  particularly  describing  the  place  to  be  searched,  and 
the  persons  or  things  to  be  seized. 

ARTICLE  V. 

Rights  of  persons  accnsed  of  crime  —  Right  of  property,  etc.  —  No 

person  shall  be  held  to  answer  for  a  capital  or  otherwise  infamous  crime 
unless  on  a  presentment  or  indictment  of  a  grand  jury,  except  in  cases 
arising  in  the  land  or  naval  forces,  or  in  the  militia,  when  in  actual  serv- 
ice in  time  of  war  or  public  danger;  nor  shall  any  pc-rson  be  sub- 
ject for  the  same  offense  to  be  twice  put  in  jeopardy  of  life  or  limb;  nor 
shall  be  compelled  in  any  criminal  case  to  be  a  witness  against  himself, 
nor  be  deprived  of  life,  liberty  or  property  without  due  process  of  law, 
nor  shall  private  property  be  taken  for  public  use  without  just  compen- 
sation. 

ARTICLE  VI. 

Criminal  prosecutioos  —  Speedy  trial,  etc.  —  la  all  criminal  prosecu- 
tions, the  accused  shall  enjoy  the  right  to  a  speedy  and  public  trial  by 
an  impartial  jury  of  the  State  and  district  wherein  the  crime  shall  have 
been  committed,  which  district  shall  have  been  previously  ascertained 
by  law,  and  to  be  informed  of  the  nature  and  cause  of  the  accusation; 
to  be  confronted  with  the  witnesses  against  him;  to  have  compulsory 
process  for  obtaining  witnesses  in  his  favor,  and  to  have  the  assistance 
of  counsel  for  his  defense. 

ARTICLE  VII. 

Trial  by  jnry  in  civil  actions.  —  In  suits  at  common  law  where  the 
value  in  controversy  shall  exceed  twenty  dollars,  the  right  of  trial  by 
jury  shall  be  preserved,  and  no  fact  tried  by  a  jury  shall  be  otherwise 
re-examined  in  any  court  of  the  United  States,  than  according  to  the 
rules  of  common  law. 


APPENDIX.  757 


ARTICLE  VIII. 


Excessive  fines,  etc.,  prohibited. —  Excessive  bail  shall  not  be  re- 
quired, nor  excessive  fines  imposed,  nor  cruel  and  unusual  punishment 
ioflicted. 

ARTICLE  IX. 

Riglits  retained  by  the  people.  — The  enumeration  in  the  Constitution 
of  certain  rights  shall  not  be  construed  to  deny  or  disparage  others  re- 
tained by  the  people. 

ARTICLE  X. 

Powers  reserved  to  the  State  or  people.  —  The  powers  not  delegated 
to  the  United  States  by  the  Constitution,  nor  prohibited  by  it  to  the 
States,  are  reserved  to  the  States  respectively,  or  to  the  people. 

ARTICLE  XI. 

Jndicial  power  — Limitation  on.  —The  judicial  power  of  the  United 
States  shall  not  be  construed  to  extend  to  any  suit  in  law  or  equity  com- 
menced or  prosecuted  against  one  of  the  United  States  by  citizens  of 
another  State,  or  by  citizens  or  subjects  of  any  foreign  State. 

(Proposed  March  5,  1791,  declared  ratified  January  8,  1798.) 

ARTICLE  XIL 

Election  of  President  and  Vice-President.  —  The  electors  shall  meet 
in  their  respective  States  and  vote  by  ballot  for  President  and  Vice-Pres- 
ident, one  of  whom,  at  least,  shall  not  be  an  inhabitant  of  the  same  State 
with  themselves;  they  shall  name  in  their  ballots  the  person  voted  for  as 
President,  and  in  distinct  ballots  the  person  voted  for  as  Vice-President, 
and  they  shall  make  distinct  lists  of  all  persons  voted  for  as  President, 
and  of  all  persons  voted  for  as  Vice-President,  and  of  the  number  of 
votes  for  each,  which  list  they  shall  sign  and  certify,  and  transmit  sealed 
to  the  seat  of  the  government  of  the  United  States,  directed  to  the  pres- 
ident of  the  Senate;  the  president  of  the  Senate  shall,  iu  presence  of  the 
Senate  and  House  of  Representatives,  open  all  the  certificates,  and  the  votes 
shall  then  be  counted ;  the  person  "having  the  greatest  number  of  votes  for 
President  shall  be  the  President,  if  such  number  be  a  majority  of  the  whole 
number  of  electors  appointed;  and  if  no  person  have  such  majority,  then 
from  the  persons  having  the  highest  number  not  exceeding  three  on  the  list 
of  those  voted  for  as  President,  the  House  of  Representatives  shall 
choose  immediately,  by  ballot,  the  President.  But  in  choosing  the  Pres- 
ident, the  votes  shall  be  taken  by  States,  the  representation  from  each 
Stale  having  one  vote;  a  quorum  for  this  purpose  shall  consist  of  a 
member  or  members  from  two-thirds  of  the  States,  and  a  majority  of 


758  APPENDIX. 

all  the  States  shall  be  necessary  to  a  choice.  And  if  the  House  of 
Representatives  shall  not  choose  a  President  whenever  the  right  of 
choice  shall  devolve  upon  them  before  the  fourth  day  of  March  next 
following,  then  the  Vice-President  shall  act  as  President,  as  in  the  case 
of  the  death  or  other  constitutional  disability  of  the  President.  The 
person  having  the  greatest  number  of  votes  as  Vice-President  shall  be 
the  Vice-President,  if  such  number  be  a  majority  of  the  whole  number 
of  electors  appointed,  and  if  no  person  have  a  majority,  then  from 
the  two  highest  numbers  on  the  list  the  Senate  shall  choose  the  Vice- 
President;  a  quorum  for  the  purpose  shall  consist  of  two-thirds  of  the 
whole  number  of  senators,  and  a  majority  of  the  whole  number  shall 
be  necessary  to  a  choice.  But  no  person  constitutionally  ineligible  to 
the  office  of  President  shall  be  eligible  to  that  of  Vice-President  of 
the  United  States. 

(Proposed  December  12,  1803,  declared  ratified  September  25,  1804.) 

ARTICLE  XIII. 

Section!.  Slavery  prohibited.  —  Neither  slavery  nor  involuntary 
servitude,  except  as  a  punishment  for  crime,  whereof  the  party  shall  have 
been  duly  convicted,  shall  exist  within  the  United  States  or  any  place 
subject  to  their  jurisdiction. 

Sec.  2.  Enforcement  of  proliibition,  —  Congress  shall  have  power 
to  enforce  this  article  by  appropriate  legislation. 

(Proposed  February  1, 1865,  declared  ratified  December  18, 1865.) 

ARTICLE  XIV. 

Section!.  Citizensliip  —  Rights  of  citizens  —  Due  process  of  law 
and  equal  protection  of  the  laws.  —  All  persons  born  or  naturalized  in 
the  United  States  and  subject  to  the  jurisdiction  thereof  are  citizens  of 
the  United  States  and  of  the  State  wherein  they  reside.  No  State  shall 
make  or  enforce  any  law  which  shall  abridge  the  privileges  or  immuni- 
ties of  citizens  of  the  United  States,  nor  shall  any  State  deprive  any 
person  of  life,  liberty  or  property  without  due  process  of  law,  nor 
deny  to  any  person  within  its  jurisdiction  the  equal  protection  of  the 
laws. 

Sec.  2.  Apportionment  of  representatives.  —  Representatives  shall 
be  apportioned  among  the  several  States  according  to -their  respective 
numljers,  counting  the  whole  number  of  persons  in  each  State,  excluding 
Indians  not  taxed.  But  when  the  right  to  vote  at  any  election  for  the 
choice  of  electors  for  President  and  Vice-President  of  the  United  States, 
representatives  in  Congress,  the  executive  and  judicial  officers  of  a  State, 
or  the  members  of  the  legislature   thereof,  is  denied  to  any  of  the  male 


APPENDIX.  759 

inhabitants  of  such  State,  being  twenty-one  years  of  age  and  citizens  of 
the  United  States,  or  in  any  way  abridged,  except  for  participation  in  rebel- 
lion or  other  crime,  the  basis  of  representation  therein  shall  be  reduced 
in  the  proportion  which  the  nunsber  of  such  male  citizens  shall  bear 
to  the  whole  number  of  male  citizens  twenty -one  years  of  age  in  such 
State. 

Sec.  3.  Disqaaliflcatiou  to  hold  office.  — No  person  shall.be  a  senator 
or  representative  in  Congress,  or  elector  of  President  or  Vice-President, 
or  hold  any  office,  civil  or  military,  under  the  United  States  or  under  auy 
State,  who,  having  previously  taken  an  oath  as  a  member  of  Congress, 
or  as  an  officer  of  the  United  States,  or  as  a  member  of  any  State  legisla- 
ture, or  as  an  executive  or  judicial  officer  of  any  State,  to  support  the 
Constitution  of  the  United  States,  shall  have  engaged  in  insurrection  or 
rebellion  against  the  same,  or  given  aid  or  comfort  to  the  enemies  there- 
of. But  Congress  may,  by  a  vote  of  two-thirds  of  each  house,  remove 
such  disability. 

Sec.  4.  Public  debt.  —  The  validity  of  the  public  debt  of  the  United 
States,  authorized  by  law,  including  debts  incurred  for  payment  of  pen- 
sions and  bounties  for  services  in  suppressing  insurrection  or  rebellion, 
shall  not  be  questioned.  But  neither  the  United  States  nor  any  State 
shall  assume  or.pay  any  debt  or  obligation  incurred  in  aid  of  insurrection 
or  rebellion  against  the  United  States,  or  any  claim  for  the  loss  or 
emancipation  of  any  slave,  but  all  such  debts,  obligations  and  claims 
shall  be  held  illegal  and  void. 

Sec.  5.  The  Congress  shall  have  power  to  enforce,  by  appropriate 
legislation,  the  provisions  of  this  article. 

(Proposed  June  16, 1866;  declared  ratified  July  28,  1868.) 

ARTICLE  XV. 

Section  1.  Elective  franchise.  —  The  rights  of  citizens  of  the  United 

States  to  vote  shall  not  be  denied  or  abridged  by  the  United  States,  or 
any  State,  on  account  of  race  or  color,  or  previous  condition  of  servitude. 

Sec.  2.  The  Congress  shall  have  power  to  enforce  this  article  by  ap- 
propriate legislation. 

(Proposed  February  27, 1869;  declared  ratified  March  30,1870.) 


STATE   CON^STITUTIOl^S  0]Sr  TAXATION 

The  vaiying  restrictioRS  imposed  b}'^  State  constitutions 
upoii  the  legislative  power  of  taxation  are  shown  in  the 
followingr  abstract.  All  of  the  State  constitutions  contain 
provisions  guaranteeing  due  process  of  law  in  the  protec- 
tion of  property.  In  some  of  the  older  States,  as  in  some 
of  the  New  England  States  and  New  York,  there  is  no 
limitation  upon  the  legislative  power  of  taxation  except 
in  this  general  guaranty  in  the  Bill  of  Rights  for  due 
process  of  law. 

Many  of  the  State  constitutions  contain  the  requirement 
of  equality  and  uniformity  in  taxation,  this  being  limited 
in  some  cases  to  the  same  class  of  subjects  within  the 
territorial  limits  of  the  authority  levying  the  tax.  It  will 
be  observed  also  that  there  is  a  material  difference  in  the 
constitutions  in  the  restrictions  upon  the  legislative  power 
of  exempting  from  taxation.  In  some  States  legislative 
exemptions  are  prohibited  and  all  property  made  subject  to 
taxation  except  as  specifically  exempted  in  the  constitution, 
while  in  others  the  legislature  is  authorized  to  make  certain 
specific  exemptions. 

It  will  be  observed  that  some  of  the  constitutions  are 
not  framed  upon  the  theory  that  the  State  legishitive  power 
is  supreme  in  taxation  except  as  limited  by  the  State  con- 
stitution, as  they  contain  specific  grants  of  power  to  levy 
certain  forms  of  taxes,  as  poll  taxes,  license  and  inheritance 
taxes ;  and  in  some  cases,  as  in  lUinois  and  Minnesota,  the 
power  to  make  special  assessments  for  local  improvements 
is  specifically  given.  These  latter  provisions  however  seem 
to  have  been  made  in  view  of  prior  decisions  holding 
that  such  methods  of  taxation  were  inconsistent  with  the 
(760) 


APPENDIX.  7G1 

constitutional  requirement  of  equality    and  uniformity  in 
taxation. 

The  more  recent  constitutions,  as  in  Virginia,  are  not- 
able for  a  more  detailed  and  specific  regulation  of  the 
exercise  of  the  taxing  power.  On  the  other  hand,  there  is 
a  strong  agitation  favoring  local  option  in  taxation,  that 
is,  separating  the  sources  of  State  and  municipal  rev- 
enue, and  allowing  municipalities  to  determine  for  them- 
selves the  subjects  of  taxation.  This  would  involve  the 
repeal  of  provisions  in  State  constitutions  which  restrict 
the  power  of  the  legislature  to  regulate  assessments  and 
taxation,  and  require  taxation  of  all  property  in  a  uniform 
manner  by  a  uniform  rule  throughout  the  State. i  ]\Iany 
of  the  constitutions  contain  express  limitations  upon  the 
rates  of  State  and  municipal  taxation,  which  have  not  been 
included  in  this  abstract,  the  purpose  being  to  include 
only  the  provisions  which  are  illustrative  of  the  policy  of 
the  State  in  restricting  the  taxing  power. 

ALABAMA. 

(Constitution  went  into  effect  November  28, 1901.) 

Sec.  91.  The  legislature  shall  not  tax  the  property,  real  or  personal, 
of  the  State,  counties  or  other  municipal  corporations,  or  cemeteries; 
nor  lots  in  incorporated  cities  or  towns,  or  within  one  mile  of  any  city 

1  The  League  of  American  Municipalities  at  its  fourth  annual  con- 
vention held  at  Charleston,  S.  C,  December  12-15,  1900,  unanimously 
adopted  the  following  resolutions :  — 

^'Besolved,  That  all  provisions  in  State  constitutions  should  be 
abolished  which  restrict  the  power  of  the  legislatures  to  regulate 
assessment  and  taxation. 

"  Besolved,  That  so  much  State  revenue,  as  may  be  required  in  excess 
of  that  derived  from  specific  taxes  should  be  apportioned  to  and  paid 
by  the  counties  or  towns  in  proportion  to  county  or  town  revenue. 

"  Besolved,  That  every  county  or  town  and  every  city  be  granted  the 
right  to  regulate  the  assesment  and  taxation  of  property  at  its  discre- 
tion, provided  any  increase  or  reduction  of  assessment  must  be  uniform 
throughout  such  county,  town  or  city,  and  not  made  on  the  ground  of 
ownership." 


762  APPENDIX. 

or  town  to  the  extent  of  one  acre,  nor  lots  one  mile  or  more  distant  from 
such  cities  or  towns  to  the  extent  of  five  acres,  with  the  buildings  thereon, 
when  same  are  used  exclusively  for  religious  worship,  for  schools,  or  for 
purposes  purely  charitable. 

Sec.  92.  The  legislature  shall  by  law  prescribe  such  rules  and  regula- 
tions as  may  be  necessary  to  ascertain  the  value  of  real  and  personal  prop- 
erty exempted  from  sale  under  legal  process  by  this  constitution,  and  to 
secure  the  same  to  the  claimant  thereof  as  selected. 

Article  VIII,  Sec.  178.  (The  payment  of  a  poll  tax  is  made  a  con- 
dition precedent  of  the  right  to  vote.  This  poll  tax,  by  Section  194,  is 
to  be  $1.50  upon  each  male  inhabitant  over  the  age  of  twenty-one  and 
under  the  age  of  forty-flve  years,  wbo  was  not,  when  the  constitution 
was  adopted,  exempt  by  law,  but  the  legislature  is  authorized  to  in- 
crease the  maximum  age  to  not  more  than  sixty  years.  No  legal  process 
is  allowed  for  the  collection  of  the  poll  tax,  and  any  payment  of  the  poll 
tax  by  another  or  the  advancement  of  money  for  that  purpose  is  made  to 
constitute  bribery.  Under  Section  259,  the  proceeds  of  all  the  poll  taxes 
are  applied  to  the  support  of  the  public  schools. ) 

Art.  XI,  Sec.  211.  All  taxes  levied  on  property  in  this  State  shall  be 
assessed  in  exact  proportion  to  the  value  of  such  property,  but  no  tax 
shall  be  assessed  upon  any  debt  for  rent  or  hire  of  real  or  personal  prop- 
erty, while  owned  by  the  landlord  or  hired  during  the  current  year  of 
such  rental  or  hire,  if  such  real  or  personal  property  be  assessed  at  its 
full  value. 

Sec.  212.  The  power  to  levy  taxes  shall  not  be  delegated  to  individuals 
or  private  corporations  or  associations.  (Under  Sections  214,  215  and 
216  the  rates  of  tax  in  the  State,  counties  and  cities  are  specifically 
limited.) 

Sec.  217.  The  property  of  private  corporations,  associations  and  indi- 
viduals of  this  State  shall  forever  be  taxed  at  the  same  rate ;  provided, 
this  section  shall  not  apply  to  institutions  devoted  exclusively  to  relig- 
ious, educational  or  charitable  purposes. 

Sec.  218.  The  legislature  shall  not  havathe  power  to  require  counties 
or  other  municipal  corporations  to  pay  any  charges  which  are  now  pay- 
able out  of  the  State  treasury. 

Section  219.  (Authorizes  the  legislature  to  levy  a  collateral  inheritance 
tax  of  not  more  than  two  and  one-half  per  cent  on  all  estates,  real  and 
personal,  in  the  State,  transferred  by  will  or  the  intestate  laws  of  the 
State.) 

Art.  XIV,  Sec.  269.  (A  special  county  tax,  specifically  limited  in  rate, 
is  authorized  for  the  support  of  public  schools.) 


APPENDIX.  763 


ARKANSAS. 


Akt.  XVI,  Sec.  5.  All  property  subject  to  taxation  shall  be  taxed  ac- 
cording to  its  value,  that  value  to  be  ascertained  in  sucli  manner  as  the 
General  Assembly  shall  direct,  making  the  same  equal  and  uniform 
throughout  the  State.  No  one  species  of  property  from  which  a  tax  may 
be  collected  shall  be  taxed  higher  than  another  species  of  property  of 
equal  value,  provided  the  general  assembly  shall  have  power  from  time 
to  time  to  tax  hawkers,  peddlers,  ferries,  exhibitions  and  privileges  in  such 
manner  as  may  be  deemed  proper.  Provided,  further,  that  the  following 
property  shall  be  exempt  from  taxation:  Public  property  used  exclusively 
for  public  purposes;  churches  as  such;  cemeteries  used  exclusively  as 
such;  school  buildings  and  apparatus,  libraries  and  grounds  used  ex- 
clusively for  school  purposes  and  buildings  and  grounds  and  material 
used  exclusively  for  public  chai'ity. 

Sec.  6.  All  laws  exempting  property  from  taxation  other  than  as 
provided  in  this  constitution  shall  be  void. 

Sec.  7.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  any  contract  or  grant  to  which  the 
State  may  be  a  party. 

Sec.  8.  The  General  Assembly  shall  not  have  power  to  levy  State 
taxes  for  any  one  year  to  exceed  in  the  aggregate  one  per  cent  of  the 
assessed  valuation. 

Sec.  11.  No  tax  shall  be  levied  except  in  pursuance  of  law,  and  every 
law  imposing  a  tax  shall  state  distinctly  the  object  of  the  same;  and  no 
moneys  arising  from  a  tax  levied  for  one  purpose  shall  be  used  for  any 
other  purpose. 

Sec.  13.  Any  citizen  of  any  county,  city  or  town  may  institute  suit  in 
behalf  of  himself  and  all  others  interested,  to  protect  the  inhabitants 
thereof  against  the  enforcement  of  any  illegal  exactions  whatever. 


CALIFORNIA. 

Constitution,  adopted  1879.  Section  1.  All  property  in  the  State  not 
exempt  under  the  laws  of  the  United  States,  shall  be  taxed  in  propor- 
tion to  its  value,  to  be  ascertained  as  provided  by  law.  The  word 
"  property,"  as  used  in  this  article  and  section,  is  hereby  declared  to  in- 
clude moneys,  credits,  bonds,  stocks,  dues,  franchises,  and  all  other 
matters  and  things,  real,  personal,  and  mixed,  capable  of  private  owner- 
ship. The  legislature  may  provide,  except  in  case  of  credits  secured  by 
mortgage  or  trust  deed,  for  a  deductiou  from  credits  of  debts  due 
to  bonafiiU  residents  of  this  State.  (Amendment  ratified  November  6, 
1895. ) 


764  APPENDIX. 

Art.  XIII,  Sec.  1.  The  following  property  is  exempted  from  taxation: 
Growing  crops,  property  used  exclusively  for  public  schools,  and  such 
as  may  belong  to  the  United  States,  this  State,  or  to  any  county  or 
municipal  corporation  within  this  State. 

Sec.  2.  Land,  and  the  improvements  thereon,  shall  be  separately 
assessed.  Cultivated  and  uncultivated  land,  of  the  same  quality,  and 
similarly  situated,  shall  be  assessed  at  the  same  value. 

Sec.  i.  A  mortgage,  deed  of  trust,  contract,  or  other  obligation  by 
which  a  debt  is  secured,  shall,  for  the  purposes  of  assessment  and  taxa- 
tion, be  deemed  and  treated  as  an  interest  in  the  property  affected 
thereby.  Except  as  to  railroad  and  other  quasi  public  corporations,  in 
case  of  debt  so  secured,  the  value  of  the  property  affected  by  such  mort- 
gage, deed  of  trust,  contract  or  obligation,  less  the  value  of  such  secur- 
ity, shall  be  assessed  and  taxed  to  the  owner  of  the  property,  and  the  value 
of  such  security  shall  be  assessed  and  taxed  to  the  owner  thereof  in  the 
county,  city  or  district  in  which  the  property  affected  thereby  is  situate. 
The  taxes  so  levied  shall  be  a  lien  upon  the  property  and  security,  and 
may  be  paid  by  either  party  to  such  security;  if  paid  by  the  owner  of 
the  security,  the  tax  so  levied  upon  the  property  affected  thereby  shall 
become  a  part  of  the  debt  so  secured;  if  the  owner  of  the  property 
shall  pay  the  tax  so  levied  on  such  security,  it  shall  constitute  a  payment 
thereon,  and  to  the  extent  of  such  payment,  a  full  discharge  thereof : 
Provided,  that  if  any  such  security  or  indebtedness  shall  be  paid  by  any 
such  debtor  or  debtors,  after  assessment  and  before  the  tax  levy,  the 
amount  of  such  levy  may  likewise  be  retained  by  such  debtor  or  debtors, 
and  shall  be  computed  according  to  the  tax  levy  for  the  preceding  year.* 

Sec.  5.  Every  contract  hereafter  made,  by  which  a  debtor  is  obligated 
to  pay  any  tax  or  assessment  on  money  loaned,  or  on  any  mortgage, 
deed  of  trust  or  other  lien,  shall,  as  to  any  interest  specified  therein, 
and  as  to  such  tax  or  assessment,  be  null  and  void. 

Sec.  6.  The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  shall  be  a  party. 

Sec.  7.  The  legislature  shall  have  the  power  to  provide  by  law  for 
the  payment  of  ail  taxes  on  real  property  by  installments. 

Sec.  8.  The  legislature  shall  by  law  require  each  taxpayer  in  this 
State  to  make  and  deliver  to  the  county  assessor,  annually,  a  statement, 
under  oath^  setting  forth  specifically  all  the  real  and  personal  property 
owned  by  such  taxpayer,  or  in  his  possession  or  under  his  control,  at 
twelve  o'clock  meridian  on  the  first  Monday  of  March. 

Sec.  10.  (Provides  for  the  assessment  of  railroads,  road-bed,  tracks 
and  rolling  stock  by  the  State  Board  "  at  the  actual  value,"  and  appor- 

*  See  supra,  §  455. 


APPENDIX. 


765 


tioned  on  the  mileage  basis  to  counties,  etc.,  on  the   line;  all  other 
property  to  be  assessed  where  located.) 

Sec.  11.  Income  taxes  may  be  assessed  to  and  collected  from  persons, 
corporations,  joint-stock  associations  or  companies  resident  or  doing 
business  in  this  State,  or  any  one  or  more  of  them,  in  such  cases  and 
amounts,  and  in  such  manner,  as  shall  be  prescribed  by  law. 

Sec.  12.  The  legislature  shall  provide  for  the  levy  and  collection  of 
an  aunual  poll  tax. 

COLORADO. 

Art.  X.  Sec.  3.  All  taxes  shall  be  uoiform  upon  the  same  class  of 
subjects  within  the  territorial  limits  of  the  autnority  levying  the  tax. 
Mines  and  mining  claims  bearing  gold,  silver,  and  other  precious 
metals  (except  the  net  proceeds  and  surface  improvements  thereof) 
shall  be  exempt  from  taxation  for  the  period  of  ten  years  from  the 
date  of  the  adoption  of  this  constitution,  and  thereafter  may  be  taxed 
as  provided  by  law.  Ditches,  canals,  and  flumes  owned  and  used  by 
individuals  or  corporations  for  irrigating  lands  owned  by  such  individ- 
uals or  corporations,  or  the  individual  members  thereof,  shall  not  be 
separately  taxed,  so  long  as  they  shall  be  owned  and  used  exclusively 
for  such  purpose. 

Sec.  4.  The  property,  real  or  personal  of  the  State,  counties,  cities, 
towns  and  other  municipal  corporations,  and  public  libraries,  shall 
be  exempt  from  taxation. 

Sec.  5.  Lots,  with  buildings  thereon,  if  said  buildings  are  used  solely 
and  exclusively  for  religious  worship,  for  schools,  or  for  strictly  chari- 
table purposes,  also  cemeteries  not  used  or  held  for  private  or  corpo- 
rate profit,  shall  be  exempt  from  taxation,  unless  otherwise  provided 
by  general  law. 

Sec.  6.  All  laws  exempting  from  taxation  property  other  than  here- 
inbefore mentioned,  shall  b£  void. 

Sec.  9.  (Is  of  the  same  import  as  the  constitution  of  Arkansas,  Art. 
XVI,  Sec.  70* 

*  The  following  constitntlonal  amendment,  permitting  local  option  In  taxation 
and  authorizing  the  Imposition  of  a  special  tax  on  land  values,  was  submitted  and 
voted  on  at  the  general  election,  November,  1902,  but  is  at  this  date,  Nov.  6, 1902, 
reported  defeated:  — 

Sec.  9.  Once  In  four  years,  but  not  oftener,  the  voters  of  any  county  In  the 
State  may,  at  any  general  election,  exempt  or  refuse  to  exempt  from  all  taxation 
for  county,  clty^  town,  echool,  road  Jind  other  local  purposes,  any  or  all  personal 


766  APPENDIX. 

CONNECTICUT. 

(The  constitution  contains  no  restraint  upon  the  taxing  power  of  the 
State  legislature,  other  than  the  general  guaranty  of  "  due  course  of 

law.") 

DELAWARE. 

Art.  VIII,  Sec.  1.  All  taxes  shall  be  uniform  upon  the  same  class  of 
subjects  within  the  territorial  limits  of  the  authority  levying  the  tax,  and 
shall  be  levied  and  collected  under  general  laws,  but  the  general 
assembly  may  by  general  laws  exempt  from  taxatiou  such  property  as  in 
the  opinion  of  the  general  assembly  will  best  promote  the  general 
welfare. 

Sec.  5.  (Provides  for  a  capitation  tax.) 

Sec.  7.  In  all  assessments  of  the  value  of  real  estate  for  taxation,  the 
value  of  the  land  and  the  value  of  the  buildings  and  improvements 
thereon  shall  be  included.  And  in  all  assessments  of  the  rental  value  of 
real  estate  for  taxation,  the  rental  value  of  the  land  and  the  rental  value 
of  the  buildings  and  the  improvements  thereon  shall  be  included.  The 
foregoing  provisions  of  this  section  shall  apply  to  all  assessments  of  the 
value  of  real  estate  or  of  the  rental  value  thereof  for  taxation  for  State, 
county,  hundred,  school,  municipal  or  other  public  purposes. 

FLORIDA. 

Art.  IX,  Sec.  1.  The  legislature  shall  provide  for  a  uniform  and  equal 
rate  of  taxation  and  shall  provide  such  regulations  as  will  secure  a  just 
valuation  of  all  property  both  real  and  personal,  excepting  such  prop- 
erty as  may  be  exempted  by  law  for  municipal,  educational,  library, 
scientific,  religious  or  charitable  purposes. 

Sec.  5.  The  legislature   may  provide  for  levying  a  special  capitation 


property  and  Improvements  on  land;  but  neither  the  whole  nor  any  part  of  the  full 
cash  value  of  any  rights  of  way,  franchises  in  public  ways,  or  land,  exclusive  of 
the  improvements  thereon,  shall  be  exempted :  Provided,  however,  that  such  ques- 
tion be  submitted  to  the  voters  by  virtue  of  a  petition  therefor,  signed  and  sworn 
to  by  not  less  than  one  hundred  resident  taxpayers  of  such  county,  and  filed  with 
the  county  clerk  and  recorder,  not  less  than  thirty  nor  more  than  ninety  days 
before  the  day  of  election. 

Sec.  11.  The  rate  of  taxation  on  property,  for  State  purposes,  shall  never  exceed 
four  mills  on  each  dollar  of  valuation;  but  the  provisions  of  this  section  shall  not 
apply  to  rights  of  way,  franchises  in  public  ways  or  land  —  the  full  cash  value  of 
which  may  be  taxed  at  such  additional  rate,  not  exceeding  two  mills  on  each  dol- 
lar of  assessed  valuation,  a  <  shal  1  be  provided  by  law,  after  exempting  all  personal 
property  and  improvements  thereon  from  such  additional  rate  of  taxation. 


APPENDIX.  767 

tax,  and  a  tax  on  licenses.  But  the  capitation  tax  shall  not  exceed  one 
dollar  a  year,  and  shall  be  applied  exclusively  to  common  school  pur- 
poses. 

Sec.  8.  No  person  or  corporation  shall  be  relieved  by  any  court  from 
the  payment  of  any  tax  that  may  be  illegal,  or  illegally  or  irregularly 
assessed,  until  he  or  it  shall  have  paid  such  portion  of  his  or  its  taxes 
as  may  be  legal,  and  legally  and  regularly  assessed. 

Sec.  9.  There  shall  be  exempt  from  taxation  property  to  the  value  of 
two  hundred  dollars  to  every  widow  that  has  a  family  dependent  on  her 
for  support,  and  to  every  person  that  has  lost  a  limb  or  been  disabled 
in  war  or  by  misfortune. 

GEORGIA. 

Art.  VII,  Sec.  1.  (Contains  a  specific  designation  of  the  purposes  for 
which  taxes  may  be  levied :  for  the  support  of  the  government,  public 
institutions,  educational  purposes,  the  public  debt,  the  suppression  of 
insurrection  and  invasion  and  defending  the  State  in  time  of  war,  and 
also  for  the  assistance  of  disabled  Confederate  soldiers  and  for  their 
widows  and  orphans.) 

Sec.  2,  §  1.  (Provides  that  all  taxation  shall  be  uniform  on  the  same 
class  of  subjects  and  ad  valorem  on  all  property  subject  to  be  taxed 
within  the  territorial  limits  of  the  authority  levying  the  tax,  and  shall  be 
levied  and  collected  under  general  laws.  The  general  assembly  may, 
however,  impose  a  tax  upon  such  domestic  animals  as,  from  their  nature 
and  habits,  are  destructive  of  other  property.) 

Sec.  2,  §  2.  The  general  assembly  may,  by  law,  exempt  from  taxation 
all  public  property,  places  of  religious  worship,  all  purely  public  charity 
institutions,  all  buildings  erected  for  and  used  as  a  college,  incorporated 
academy,  or  public  library,  *  *  *  all  books  and  philosophical  ap- 
paratus; *  *  *  Provided,  the  property  so  exempted  be  not  used  for 
purposes  of  private  or  corporate  profit. 

Sec.  2,  §  3.  No  poll  tax  shall  be  levied  except  for  educational  purposes. 

Sec.  2,  §  4.  All  laws  exempting  property  from  taxation  other  than 
the  property  herein  enumerated,  shall  be  void. 

Sec.  2,  §  5.  The  power  to  tax  corporations  and  corporate  property 
shall  not  be  surrendered  or  suspended  by  a  contract  or  grant  to  which 
the  State  shall  be  a  party. 

IDAHO. 

Art.  VII,  Sec.  2.  The  legislature  shall  provide  such  revenue  as  may 
be  needful,  by  levying  a  tax  by  valuation,  so  that  every  person  or  cor- 


768  APPENDIX. 

poration  shall  pay  a  tax  in  proportion  to  the  value  of  his,  her  or  its 
property,  except  as  in  this  article  otherwise  provided.  C^icense  taxes 
and  poll  taxes  are  specifically  authorized.)  The  legislature  may  exempt 
from  taxation  a  limited  amount  of  improvements  upon  lands. 

Sec.  5.  All  taxes  shall  be  uniform  upon  the  same  class  of  subjects 
within  the  territorial  limits  of  the  authority  levying  the  tax,  and  shall 
be  levied  and  collected  under  general  lavrs,  which  shall  prescribe  such 
regulations  as  shall  secure  a  just  valuation  for  taxation  of  all  the  prop- 
erty, real  and  personal;  Provided,  that  the  legislature  may  allow  such 
exemption  from  the  tax  from  timt  to  time  as  shall  seem  necessary  and 
just;  Provided,  further,  that  duplicate  taxation  of  property  for  the  same 
purpose  for  the  same  year  is  hereby  prohibited. 

(Under  Act  of  March  3, 1895,  the  legislature  has  exempted  not  only  school 
and  church  property,  and  $I,O00  of  the  property  belonging  to  widows 
and  orphans  where  the  total  is  §5,000  or  less,  but  growing  crops,  capital 
stock  of  corporations  where  the  corporate  property  is  assessed,  libraries, 
tools  not  exceeding  §200,  possessory  rights  to  lands  and  mining  claims, 
and  all  debts  and  credits  secured  by  mortgage  deed  or  other  lien.) 

Sec.  8.  The  power  to  tax  corporations  or  corporate  property,  both 
real  and  personal,  shall  never  be  relinquished  or  suspended,  and  all  cor- 
porations in  this  State,  or  doing  business  therein,  shall  be  subject  to  tax- 
ation on  real  and  personal  property  owned  or  used  by  them,  and  not  by 
the  constitution  exempted  from  taxation,  within  the  territorial  limits  of 
the  authority  levying  the  tax. 


ILLINOIS. 

Article  IX,  Sec.  1.  The  general  assembly  shall  provide  such  revenue 
as  may  be  needful  by  levying  a  tax,  by  valuation,  so  that  every  person 
and  corporation  shall  pay  a  tax  in  proportion  to  the  value  of  his,  her  or 
its  property.     (License  taxes  are  specifically  authorized.) 

Sec.  3.  The  property  of  the  State,  counties,  and  other  municipal  cor- 
porations, property  used  exclusively  for  agricultural  or  horticultural 
societies,  and  for  schools,  religious,  cemetery  and  charitable  purposes 
may  be  exempted  from  taxation ;  but  such  exemption  shall  be  only  by 
general  law. 

Sec.  4.  There  shall  be  no  sale  of  property  for  taxes  or  assessments 
but  by  some  general  officer  of  the  county  having  authority  to  receive 
State  and  county  taxes,  upon  the  order  or  judgment  of  some  court  of 
record. 

Sec.  6.  The  General  Assembly  shall  have  no  power  to  release  or  dis- 
charge any  county,  city,  township,  town  or  district  whatever,  or  the  in- 
habitants thereof,  or  the  property  therein,  from  their  or  its  proportion- 


APPENDIX.  769 

ate  share  of  taxes  to  be  levied  for.  State  purposes,  nor  shall  commuta- 
tion for  such  taxes  be  authorized  in  any  form  whatsoever. 

Sec.  9.  The  general  assembly  may  vest  the  corporate  authorities  of 
cities,  towns  and  villages  with  power  to  make  local  improvements  by 
special  assessments  or  by  special  taxation  of  contiguous  properly  or 
otherwise.  For  all  other  corporate  purposes,  all  municipal  corpora- 
tions may  be  vested  with  authority  to  assess  and  collect  taxes;  but  such 
taxes  shall  be  uniform  in  respect  to  persons  and  property  within  the 
juri.-diction  of  the  body  imposing  the  same. 

(Prior  to  the  adoption  of  this  constitution  in  1870,  assessments  on  the 
frontage  rule  had  been  held  unconstitutionalj  Chicago?;.  Larned,  34  111. 
203,  but  under  the  present  constitution  such  assessments  are  enforced.) 

INDIANA. 

Akt.  10,  Sec.  1.  The  general  assembly  shall  provide,  by  law,  for  a 
uniform  and  equal  rate  of  assessment  and  taxation,  and  shall  prescribe 
such  regulations  as  shall  secure  a  just  valuation  for  taxation  of  all 
property,  both  real  and  personal,  excepting  such  only  for  municipal, 
educational,  literary,  scientific,  religious  or  charitable  purposes  as  may 
be  specifically  exempted  by  law.  (See  State  ex  rel.  v.  Smith,  63  N.  E. 
Eep.  25,  214,  supra.) 

IOWA. 

Art.  I,  Sec.  6.  The  general  assembly  shall  not  grant  to  any  citizen, 
or  class  of  citizens,  privileges  or  immunities,  which,  upon  the  same 
terms,  shall  not  equally  belong  to  all  citizens. 

Art.  Ill,  Sec.  80.  The  general  assembly  shall  not  pass  local  or  special 
laws  for  the  assessment  and  collection  of  taxes  for  State,  county  or 
road  purposes. 

Art.  VII,  Sec.  7.  Every  law  which  imposes,  continues  or  revises  a 
tax  shall  distinctly  state  the  tax  and  object  to  which  it  is  to  be  applied, 
and  it  shall  not  be  sufficient  to  refer  to  any  other  law  to  fix  such  tax  or 
object. 

Art.  VIII,  Sec.  2.  The  property  of  all.  corporations  for  pecuniary 
profit  shall  be  subject  to  taxation,  the  same  as  that  of  individuals. 

KANSAS. 

Art.  XI,  Sec.  1.  The  legislature  shall  provide  for  a  uniform  and 
equal  rate  of  assessment  and  taxation.  Property  used  for  State,  county, 
municipal,  literary,  educational  and  charitable  purposes,  and  personal 
property  to  the  amount  of  at  least  $200.00  for  each  family,  exempted 
from .  taxation. 

49 


770  APPENDIX. 

Sec.  2.  The  legislature  shall  provide  for  taxing  the  notes,  bills  and 
other  property  of  banlis  so  that  such  property  shall  bear  a  burden  equal 
to  that  imposed  upon  the  property  of  individuals. 

Sec.  4.  No  tax  shall  be  levied  except  in  pursuance  of  a  laWj  v?hich 
shall  distinctly  state  the  object  of  the  same;  to  which  object  only  such 
tax  shall  be  applied. 

KENTUCKY. 

Sec.  170.  (Among  other  property,  the  crops  grown  in  the  year  of  the 
assessment  and  in  the  hands  of  the  producer,  and  household  goods 
and  other  personal  property  of  a  person  with  a  family,  not  exceeding 
$250.00  in  value,  are  exempted  from  taxation.  The  General  Assembly 
may  authorize  any  incorporated  city  or  town  to  exempt  manufacturing 
establishments  from  municipal  taxation,  for  a  period  not  exceeding  five 
years,  as  an  inducement  to  their  location.) 

Sec.  171.  Taxes  shall  be  levied  and  collected  for  public  purposes  only. 
They  shall  be  uniform  upon*  all  property  subject  to  taxation  within  the 
territorial  limits  of  the  authority  levying  the  same;  all  taxes  shall  be 
levied  and  collected  by  general  laws. 

Sec.  172.  All  property  not  exempted  from  taxation  by  this  constitution 
shall  be  assessed  for  taxation  at  its  fair  cash  value. 

Sec.  174.  All  property,  whether  owned  by  natural  persons  or  corpora- 
tions, shall  be  taxed  in  proportion  to  its  value  unless  exempted  by  this 
constitution ;  all  corporate  property  shall  pay  the  same  rate  of  taxation 
paid  by  individual  property;  nothing  in  the  constitution  shall  be  so  con- 
strued as  to  prevent  the  general  assembly  from  providing  for  taxation, 
based  on  income,  licenses  or  franchises. 

Sec.  175.  The  power  to  tax  property  shall  not  be  surrendered  or  sus- 
pended by  any  contract  or  grant  to  which  the  commonwealth  shall  be  a 
party. 

Sec.  180.  (Gives  special  authority  to  levy  a  poll  tax.) 

Sec.  181.  The  general  assembly  shall  not  impose  taxes  for  the  purposes 
of  any  county,  city,  town  or  other  municipal  corporation,  but  may,  by 
general  laws,  confer  on  the  proper  authorities  thereof,  respectively,  the 
power  to  assess  and  collect  such  taxes. 

LOUISIANA. 

Constitution  of  1898,  Art.  224.  The  taxing  power  may  be  exercised 
by  the  general  assembly  for  State  purposes,  and  by  parishes  and  munici- 
pal corporations  and  public  boards,  under  authority  granted  to  them  by 
the  general  assembly,  for  parish,  municipal  and  local  purposes,  strictly 
public  in  their  nature. 


APPENDIX.  771 

Art.  225.  Taxation  shall  be  equal  and  uniform  throughout  the  territo- 
rial limits  of  the  authority  levying  the  tax,  and  all  property  shall  be  taxed 
in  proportion  to  its  value,  to  be  ascertained  as  directed  by  lav?;  provided 
the  assessment  of  all  property  shall  never  exceed  the  actual  cash  value 
thereof;  and  provided,  further,  that  the  taxpayers  shall  have  the  right 
of  testing  the  correctness  of  their  assessments  before  the  courts  of  jus- 
tice. In  order  to  arrive  at  this  equality  and  uniformity,  the  general 
assembly  shall,  at  its  first  session  after  the  adoption  of  this  constitution, 
provide  a  system  of  equality  and  uniformity  in  assessments  based  upon 
the  relative  value  of  property  in  different  portions  of  the  State.  The 
valuation  put  upon  property  for  the  purposes  of  State  taxation  shall  be 
takt  n  as  the  proper  valuation  for  purposes  of  local  taxation,  in  every 
subdivision  in  this  State. 

Art.  227.  The  taxing  power  may  be  used  to  provide  pensions  for 
indigent  Confederate  soldiers  and  sailors,  and  their  widows,  to  establish 
markers  or  monuments  upon  the  battlefields  of  the  country,  commem- 
orative of  the  services  of  Louisiana  soldiers  on  such  fields,  and  to  main- 
tain a  memorial  hall  in  New  Orleans,  to  collect  memorials  of  the  late 
Civil  War. 

Art.  228.  The  power  to  tax  corporations  and  corporate  property  shall 
never  be  surrendered  nor  suspended  by  act  of  the  general  assembly. 

Art.  230.  Among  orher  things,  there  shall  be  exempt  from  taxation 
for  10  years  from  January  1,  1900,  the  capital,  machinery  and  other 
property  employed  in  mining  operations,  and  in  the  manufacture  of  tex- 
tile fabrics,  yarns,  rope  and  certain  other  articles. 

Art.  231.  (Gives  special  authority  to  levy  a  poll  tax.) 

Art.  233.  There  shall  be  no  forfeiture  of  property  for  non-payment  of 
taxes,  but  there  must  be  sale,  with  the  privilege  to  the  taxpayer  of  re- 
deeming within  one  year.  All  deeds  of  sale  made  by  the  collectors  shall 
be  received  as  prima  facie  evidence  of  a  valid  sale. 

Art.  234.  The  tax  shall  be  designated  by  the-year  in  which  it  is  collect- 
ible, and  the  tax  on  movable  property  shall  be  collected  in  the  year  in 
which  the  assessment  is  made. 

Art.  235.  An  inheritance  tax  maybe  levied  by  the  legislature  solely 
for  support  of  the  public  schools  on  all  inheritances  greater  than  $10,000. 

Art.  237.  The  legislature  shall  pass  no  law  postponing  the  payment  of 
taxes,  except  in  case  of  overflow,  general  conflagration,  general  destruc- 
tion of  crops,  or  other  public  calamity. 

Art.  242.  Foreign  corporations  doing  business  in  Louisiana  may  be 
licensed  or  taxed  by  a  mode  different  from  that  provided  for  home  com- 
panies, provided  that  this  different  mode  shall  be  uniform,  upon  a  grad- 
uated system,  and  shall  be  equal  and  uniform  as  to  all  corporations  doing 
the  same  kind  of  business. 


772  APPENDIX. 

MAINE. 

Art.  IX,  Sec.  7.  A  general  valuation  of  property  shall  be  taken  at  least 
once  in  10  years. 

Sec.  8.  All  taxes  upon  real  and  personal  estate,  assessed  by  authority 
of  this  State,  shall  be  apportioned  and  assessed  equally  according  to  the 
just  value  thereof. 

Sec.  9.  The  legislature  shall  never,  in  any  manner,  suspend  or  surren- 
der the  power  of  taxation. 

MARYLAND. 

Dkclaration  of  Rights,  Art.  15.  The  levying  of  taxes  by  the  poll  is 
grievous  and  oppressive  and  ought  to  be  prohibited;  paupers  ought 
not  to  be  assessed  for  the  support  of  the  government;  but  every  person  in 
the  State,  or  person  holding  property  therein,  ought  to  contribute  his 
proportion  of  public  taxes  for  the  support  of  the  government,  according 
to  his  actual  v?orth  in  real  or  personal  property;  yet  fines,  duties  or  taxes 
may  properly  and  justly  be  imposed  or  laid,  with  a  political  view  for  the 
good  government  and  benefit  of  the  community. 

MASSACHUSETTS. 

Declaration  of  Rights,  Art.  X.  No  part  of  the  property  of  any 
individual  can,  with  justice,  be  taken  from  him  or  applied  to  public 
uses,  without  his  own  consent  or  that  of  the  representative  body  of 
the  people. 

Part  2,  Ch.  1,  Art.  IV.  The  general  court  has  power  to  impose  and 
levy  proportional  and  reasonable  assessments,  rates,  and  taxes,  upon 
all  the  inhabitants  of,  and  persons  resident,  and  estates  lying  within 
the  said  commonwealth.  (For  a  full  statement  of  the  Massachusetts 
ijystem  of  taxation  and  the  practical  exemption  of  mortgages  there- 
under, see  the  report  of  the  Tax  Commission  of  1897  ) 

MICHIGAN.     I  Amended  in  1900,  see  p.  265 ;  also  p.  789.) 

Art.  XIV",  Sec.  11.  The  legislature  shall  provide  a  uniform  rule  of 
taxation,  except  on  property  paying  specific  taxes,  and  taxes  shall 
be  levied  on  such  property  as  shall  be  prescribed  by  law. 

Sec.  12.  All  assessments  hereafter  authorized  shall  be  on  property 
at  its  cash  value. 

Sec.  14.  (Is  the  same  as  the  Iowa  constitution.  Art  "VII,  Sec.  7.) 

MINNESOTA . 

Art.  IX.  Finances  of  the  State  and  Banks  and  Banking. 


APPENDIX.  773 

Sec.  1.  All  taxes  to  be  raised  in  this  State  shall  be  as  cearly  equal  as 
may  be,  and  all  property  on  which  taxes  are  to  be  levied  shall  have 
a  cash  valuation  and  be  equalized  and  uniform  throughout  the  State, 
provided  that  the  legislature  may  by  general  law  or  specific  act, 
authorize  municipal  corporations  to  levy  assessments  for  local  im- 
provements upon  the  property  fronting  upon  fcuch  inaprovements,  or 
upon  the  property  to  be  benefited  by  such  improvements,  and  in 
such  manner  as  the  legislature  may  prescribe.  And  provided  fur- 
ther, that  for  the  purpose  of  defraying  the  expenses  of  laying 
water  pipes  and  supplying  any  city  or  municipality  with  water,  the 
legislature  may,  by  general  or  special  law,  authorize  any  such  city  or 
municipality,  having  a  population  of  5,000  or  more,  to  levy  an  annual  tax 
or  assessment  upon  the  lineal  foot  of  all  lands  fronting  on  any  water 
main  or  water  pipe  laid  by  such  city  or  municipality  within  corporate 
limits  of  said  city  for  supplying  water  to  the  citizens  thereof  without  re- 
gard to  the  cash  value  of  such  properly,  and  to  empower  such  city  to 
coliect  any  such  tax,  assessments  or  fines,  or  penalties  for  failure  to 
pay  the  same,  or  any  fine  or  penalty  for  any  violation  of  the  rules  of  such 
city  or  municipality  in  regard  to  the  use  of  water,  or  for  any  water  rate 
due  for  the  same. 

Sec.  3.  Laws  shall  be  passed  taxing  all  moneys,  credits,  iuvestments 
in  bonds,  stocks,  joint  stock  companies,  or  otherwise,  and  also  a'l 
real  and  personal  property,  according  to  its  true  value  in  money; 
but  public  burying  grounds,  public  schoolhouses,  public  hospitals, 
academies,  colleges,  universities,  and  all  seminaries  of  learning,  all 
churches,  church  property  used  for  religious  purposes  and  houses  of 
worship,  institutions  of  purely  public  charity,  public  propc^rty  used 
exclusively  for  any  public  purpose,  and  personal  property  to  an  amount 
not  exceeding  in  value  two  hundred  dollars  for  each  individual,  shall 
by  general  laws  be  txt  mpt  from  taxation. 

Sec.  4.  (Same  as  Art.  XI,  Sec.  2,  Kans.  Const,  swpra.) 

MISSISSIPPI. 

Sec.  112.  Taxation  shall  be  uniform  and  equal  throughout  the  State. 
Property  shall  be  taxed  in  proportion  to  its  value.  The  legislature  may, 
however,  impose  a  tax  per  capita  upon  such  domestic  animals  as  from  their 
nature  and  habits  are  destructive  of  other  property.  Property  shall  be 
assessed  for  taxes  under  general  laws,  and  by  uniform  rules,  according 
to  its  true  value.  But  the  legislature  may  provide  for  a  special  mode  of 
valuation  and  assessment  for  railroads,  and  railroad  and  other  corporate 
property,  or  forparticular  species  of  property  belonging  to  persons,  cor- 
porations or  associations  not  situated  wholly  in  one  county.  But  all  such 
property  shall  be  assessed  at  its  true  value,  and  no  county  shall  be  de- 
nied the  right  to  levy  county  and  special  taxes  upon  such  assessment  as 
in  other  cases  of  property  situated  and  assessed  in  the  county. 


774  APPENDIX. 

Sec.  182.  The  power  to  tax  corporations  and  their  property  shall 
never  be  suspended  or  abridged  by  any  contract  or  grant  to  which  the 
State  or  any  political  subdivision  thereof  may  be  a  party,  except  that  the 
legislature  may  grant  exemptions  from  taxation  in  the  encouragement  of 
manufactures  and  other  new  enterprises  of  public  utility  extending  for 
a  period  not  exceeding  five  years. 

MISSOURI. 

Art.  X,  Sec.  2.  The  power  to  tax  corporations  and  corporate  prop- 
erty shall  not  be  surrendered  or  suspended  by  act  of  the  general  as- 
sembly. 

Sec.  3.  Taxes  may  be  levied  and  collected  for  public  purposes  only. 
They  shall  be  uniform  upon  the  same  class  of  subjects  within  the  terri- 
torial limits  of  the  authority  levying  the  tax,  and  all  taxes  shall  be  levied 
and  collected  by  general  laws. 

Sec.  i.  All  property  subject  to  taxation  shall  be  taxed  in  proportion 
to  its  value. 

Sec.  6.  The  property,  real  and  personal,  of  the  State,  counties  and 
other  municipal  corporations,  and  cemeteries,  shall  bi  exempt  from  tax- 
ation. Lots  in  incorporated  cities  or  towps,  or  within  one  mile  of  the 
limits  of  any  such  city  or  town,  to  the  extent  of  one  acre,  and  lots  one 
mile  or  more  distant  from  such  cities  or  towns,  to  the  extent  of  five 
acres,  with  the  buildings  thereon,  may  be  exempted  from  taxation  when 
the  same  are  used  exclusively  for  religious  worship,  for  schools,  or  for 
purposes  purely  charitable;  also,  such  property,  real  or  personal,  as 
may  be  used  exclusively  for  agricultural  or  horticultural  societies; 
Provided,  that  such  exemption  shall  be  only  by  general  law. 

Sec.  7.  All  laws  exempting  property  from  taxation,  other  than  the 
property  above  enumerated,  shall  be  void. 

Sec.  11.  Taxes  for  county,  city,  town  or  school  purposes  may  be 
levied  on  all  subjects  and  objects  of  taxation,  but  the  valuation  of  prop- 
erty therefor  shall  not  exceed  the  valuation  of  the  same  property  in  such 
town,  city  or  school  district  for  State  and  county  purposes. 

(The  frontage  rule  for  street  improvements  is  recognized  in  the  char- 
ters of  St.  Louis  and  Kansas  City,  and  also  general  incorporation  acts 
for  cities  in  the  State,  R.  S.,  1899,  Sees.  5392,  5662.  The  area  rule 
has  been  adopted  for  sewers.  Sec.  5396.  Under  the  amended  city  charter 
of  St.  Louis,  Oct.,  1901,  street  improvements  are  paid,  one-fourth,  ac- 
cording to  the  frontage  rule,  and  three -fourths  according  to  a  district 
made  up  of  one-half  the  adjoining  blocks.) 


APPENDIX.  775 

MONTANA. 

Art.  XII,  Sec.  1.  The  necessary  revenue  for  the  support  and  main- 
tenance of  the  State  shall  be  provided  by  the  legislative  assembly,  which 
shall  levy  a  uniform  rate  of  assessment  aad  taxation,  and  shall  prescribe 
such  regulations  as  shall  secure  a  just  valuation  for  tixation  of  all 
property,  except  that  specially  provided  for.  The  legislature  may  also 
impose  a  license  tax,  both  upon  persons  and  corporations  doing  business 
in  the  State. 

Sec.  2.  The  property  of  the  Uuited  States,  the  State,  counties,  cities, 
towns,  school  districts,  municipal  corporations,  and  public  libraries  shall 
be  exempt  from  taxation;  and  such  other  property  as  may  be  used  ex- 
clusively for  agricultural  aad  horticulcural  societies,  for  educational 
purposes,  places  for  actual  religious  worship,  hospitals  and  places  of 
burial  not  used  or  held  for  private  or  corporate  profit,  and  institutions 
of  purely  public  charity  may  be  exempt  from  taxation. 

Sec.  3.  All  mines  and  mining  claims,  both  placer  and  rock  in  place, 
containing  or  bearing  gold,  silver,  copper,  lead,  coal,  or  other  valuable 
mineral  deposits,  after  purchase  thereof  from  the  United  States,  shall 
be  taxed  at  the  price  paid  the  United  States  therefor,  unless  the  sur- 
face ground,  or  some  part  thereof,  of  such  mine  or  claim,  is  used  for 
other  than  mining  purposes,  and  has  a  separate  and  independent  value 
for  such  other  purposes,  in  which  case  said  surface  ground,  or  any 
part  thereof,  so  used  for  other  than  mining  purposes,  shall  be  taxed  at 
its  value  for  such  other  purposes,  as  provided  by  law;  and  all  machin- 
ery used  in  mining,  and  all  property  and  surface  improvements  upon  or 
appurtenant  to  mines  and  mining  claims  which  have  a  value  separate 
and  independent  of  such  mines  or  mining  claims,  and  the  annual  net 
proceeds  of  all  mines  and  mining  claims  shall  be  taxed  as  provided  by 
law. 
Sec.  4  (Same  as  Sec.  181,  Kentucky  Const.  1891,  supra.) 
Sec.  5.  (Same  as  Sec.  11,  Missouri  Const.  1875,  supra.) 
Sec.  7.  (To  the  same  effect  as  Sec.  228  Const,  of  La.  1898.) 

Sec.  8.  Private  property  shall  not  be  taken  or  sold  for  the  corporate 
debts  of  public  corporations,  but  the  legislative  assembly  may  provide 
by  law  for  the  funding  thereof,  and  shall  provide  by  law  for  the  pay- 
ment thereof,  by  assessment  and  taxation  of  all  private  property  not 
exempt  from  taxation  within  the  limits  of  the  territory  over  which 
such  corporations  respectively  have  authority. 

Sec.  11.  Taxes  shall  be  levied  and  collected  by  general  laws  and  for 
public  purposes  only.  They  shall  be  uniform  upon  the  same  class  of 
subjects  within  the  territorial  limits  of  the  authority  levying  the  tax. 


776  APPENDIX. 

Sec.  12.  No  appropriation  of  public  moynes  shall  be  made  for  a  longer 
term  than  two  years. 

Sec.  16.  (Provides  for  assessment  of  railroad  tracl^s,  rolling  stock, 
etc.,  by  the  State  Board,  and  mileage   apportionment.) 

Sec.  17.  The  word  property  as  used  in  this  article  is  l^ereby  declared 
to  include  moneys,  credits,  bonds,  stocks,  franchises  and  all  matters 
and  things  (real,  personal  and  mixed)  capable  of  private  ownership, 
but  this  shall  not  be  construed  so  as  to  authorize  the  taxation  of  the 
stocks  of  any  company  or  corporation  when  the  property  of  such  com- 
pany or  corporation  represented  by  such  stocks  is  within  the  State  and 
has  been  taxed. 

NEBRASKA. 

Art.  IX,  Sec.  1.  The  legislature  shall  levy  a  tax  by  valuation,  so 
that  every  person  and  corporation  shall  pay  a  tax  in  proportion  to  the 
value  of  his,  her,  or  its  property  and  franchises,  the  value  to  be  ascer- 
tained in  such  manner  as  the  legislature  shall  direct,  and  it  shall  have 
power  to  tax  peddlers,  auctioneers,  brokers,  bankers,  commission  mer- 
chants, showmen,  jugglers,  innkeepers,  liquor  dealers,  toll  bridges, 
ferries,  insurance,  telegraph  and  express  interests  or  business,  venders 
of  patents',  in  such  manner  as  it  shall  direct  by  general  law,  uniform 
as  to  the  class  upon  which  it  operates. 

Sec.  2.  The  property  of  the  State,  counties  and  municipal  corpo- 
rations, both  real  and  personal,  shall  be  exempt  from  taxation,  and 
such  other  property  as  may  be  used  exclusively  for  agricultural  and 
horticultural  societies,  for  school,  religious,  cemetery,  and  charitable 
purposes,  may  be  exempted  from  taxation,  but  such  exemptions  shall  be 
only  by  general  laws.  In  the  assessment  of  all  real  estate  incumbered 
by  public  easement,  any  depreciation  occasioned  by  such  easement  may 
be  deducted  in  the  valuation  of  such  property.  The  legislature  may 
provide  that  the  increased  value  of  lands,  by  reason  of  live  fences,  fruit 
and  forest  trees  grown  and  cultivated  thereon,  shall  not  be  taken  into 
account  in  the  assessment  thereof. 

Sec.  3.  The  right  of  redemption  from  all  sales  of  real  estate  for  the 
non-payment  of  taxes  or  special  assessments  of  any  character  whatever, 
shall  exist  in  favor  of  owners  and  persons  interested  in  such  real  estate 
for  a  period  of  not  less  than  two  years  from  such  sales  thereof;  Provided, 
That  occupants  shall  in  all  cases  be  served  with  personal  notice  before 
the  time  of  redemption  expires. 

Sec.  4.  The  legislature  shall  have  no  power  to  release  or  discharge 
any  county,  city,  township,  town  or  district  whatever,  or  the  inhab- 
itants thereof,  or  any  corporation,  or  the  property  therein,  from  their 
or  its  proportionate  share  of  taxes  to  be  levied  for  State  purposes,  or 


APPENDIX.  777 

due  any  municipal  corporation,  nor  shall  commutation  for  such  taxes 
be  authorized  in  any  form  whatever. 

Sec.  6.  The  legislature  may  vest  the  corporate  authorities  of  cities, 
towns,  or  villages  with  power  to  make  local  improvements  by  special 
assessments,  or  by  special  taxation  of  property  benefited.  For  all  other 
corporate  purposes,  all  municipal  corporations  may  be  vested  with  au- 
thority to  assess  and  collect  taxes,  but  such  taxes  shall  be  uniform  in 
respect  to  persons  and  property  within  the  jurisdiction  of  the  body 
imposing  the  same. 

NEVADA. 

Art.  X,  Sec.  1.  The  legislature  shall  provide  by  law  for  a  uniform  and 
equal  rate  of  assessment  and  taxation,  and  shall  prescribe  such  regula- 
tions as  shall  secure  a  just  valuation  for  taxation  of  all  property,  real, 
personal,  and  possessory,  excepting  mines  and  mining  claims,  the  pro- 
ceeds of  which  alone  shall  be  taxed,  and  also  excepting  such  property  as 
may  be  exempted  by  law  for  municipal,  educational,  literary,  scientific, 
religious,  or  charitable  purposes. 

NEW  HAMPSHIRE. 

Part  Second,  Art.  6.  While  the  public  charges  of  government  or  any 
part  thereof  shall  be  assessed  on  polls  and  estates  in  the  manner  that 
has  heretofore  been  practiced,  in  order  that  such  assessments  may  be 
made  with  equality,  there  shall  be  a  valuation  of  the  estates  within 
the  State  taken  anew  once  in  every  five  years,  at  least,  and  as  much 
ofteneras  the  general  court  shall  order. 

NEW  JERSEY. 

Constitution  as  Amended  in  1875.  Art.  IV,  Sec.  7,  Par.  12.  Prop- 
erty shall  be  assessed  for  taxes  under  general  laws,  and  by  uniform  rules, 
according  to  its  true  value. 

NEW  YORK. 

(The  constitution  of  New  York  contains  no  limitation  upon  the  legisla- 
tive power  of  taxation,  except  in  the  requirement  that  every  law  imposing 
a  tax  shall  state  the  purpose  to  which  it  is  to  be  applied.) 

NORTH  CAROLINA. 

Declaration  of  Rights,  Sec.  17.  No  person  ought  to  be  taken,  im- 
prisoned, or  disseized  of  his  freehold,  liberties,  or  privileges,  or  out- 
lawed or  exiled,  or  in  any  manner  deprived  of  bis  life,  liberty  or  property, 
but  by  the  law  of  the  land. 


778  APPENDIX. 

Art.  V,  Sec.  1.  The  General  Assembly  shall  levy  a  capitation  tax  on 
every  male  inhabitant  in  the  State  over  tweuty-one  and  under  fifty  years 
of  age,  which  shall  be  equal  on  each  to  the  tax  on  property  valued  at 
$300.00  in  cash.  The  commissioners  of  the  several  counties  may  exempt 
from  capitation  tax  in  special  cases,  on  account  of  poverty  and  infirmity, 
and  the  State  and  county  capitation  tax  sball  never  exceed  two  dollars 
on  the  head. 

Sec.  2.  (Provides  for  the  application  of  the  proceeds  of  the  State  and 
county  capitation  tax  to  education  and  the  poor;  only  25  per  cent  to 
go  to  the  latter  in  any  one  year.) 

Sec.  3.  Laws  shall  be  passed  for  taxing  by  a  uniform  rule  all  moneys, 
credits,  investments  in  bonds,  stocks,  joint-stock  companies,  or  other- 
wise, and,  also,  all  real  and  personal  property,  according  to  its  true 
value  in  money.  The  general  asst  mbly  shall  also  tax  trades,  professions, 
franchises,  and  incomes,  provided  that  no  income  shall  be  taxed  when 
the  property  from  which  it  is  derived  is  taxed. 

Sec.  5-  (Public  property  is  exempted,  and  the  general  assembly  is  em- 
powered to  exempt  cemeteries  and  property  held  for  educational,  scien- 
tific, literai'y,  charitable,  or  religious  purposes;also  wearing  apparel,  arms 
for  muster,  household  and  kitchen  furniture,  the  mechanical  and  agricul- 
tural implements  of  mechanics  and  farmers,  libraries  and  scientific 
instruments,  or  any  other  personal  property,  to  a  value  not  exceeding 
$300.00.) 

Sec.  6.  (County  taxes  are  not  to  exceed  double  the  State  taxes,  except 
for  special  purposes  and  with  the  special  approval  of  the  general 
assembly.) 

Sec.  7.  Every  act  of  the  general  assembly  levying  a  tax  shall  state  the 
special  object  to  which  it  is  to  be  applied,  and  it  shall  be  applied  to  no 
other  purpose. 

NORTH  DAKOTA. 

Constitution  of  1890,  Art.  XI,  Sec.  175.  (To  the  same  effect  as 
Iowa  Const.,  Art.  VII,  Sec.  7.) 

Sec.  176.  Laws  shall  be  passed  taxing  by  uniform  rule  all  property  ac- 
cording to  its  true  value  in  money.  Property  of  the  United  States,  the 
State,  and  county  and  municipal  corporations  is  exempt  from  taxation. 
The  legislative  assembly  shall  by  a  general  law  exempt  property  used 
exclusively  for  school,  religious,  cemetery  and  charitable  purposes,  and 
personal  property  to  any  amount  not  exceeding  in  value  $200  for  each 
individual  liable  to  taxation. 

Sec.  177.  All  improvements  on  land  shall  be  assessed  in  the  manner 
prescribed  bylaw, -but  plowing  shall  not  be  considered  as  an  improve- 
ment or  add  to  the  value  of  laud  for  the  purpose  of  assessment. 


APPENDIX.  779 

Sec.  178.  The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  or  any  county  or  other 
municipal  corporation  shall  be  a  party. 

Sec.  180.  (Authorizes  a  poll  tax.) 

OHIO. 

Art.  XII,  Sec.  1.  The  levying  of  taxes  by  the  poll  is  grievous  and 
oppressive;  therefore,  the  general  assembly  shall  never  levy  a  poll  tax 
for  county  or  State  purposes. 

Sec.  2.  Laws  shall  be  passed  taxing  by  a  uniform  rule  all  moneys, 
credits,  investments  in  bonds,  stocks,  joint-stock  companies  or  other- 
wise; and  also  all  real  and  personal  property  according  to  its  true  value 
in  money.  Burial  grounds,  public  schoolhouses,  houses  of  worship, 
institutions  of  purely  public  charity,  public  property  used  exclusively 
for  any  public  purpose,  *  *  *  may,  by  general  laws,  be  exempted 
from  taxation;  but  all  such  laws  shall  be  subjected  to  alterations 
and  repeal;  and  the  value  of  all  property  so  exempted,  shall,  from 
time  to  time,  be  ascertained  and  published,  as  may  be  directed  by  law. 

Sec.  3.  (To  the  same  effect  as  Kansas  Constitution,  Art.  XI,  Sec.  2.) 

Sec.  5.  No  tax  shall  be  levied  except  in  pursuance  of  law,  and  every 
law  imposing  a  tax  shall  state  distinctly  the  object  of  the  same,  to  which 
only  it  shall  be  applied. 

OREGON. 

Art.  IX,  Sec.  1.  The  legislative  assembly  shall  provide  by  law  for  a  uni- 
form and  equal  rate  of  assessment  and  taxation;  and  shall  prescribe  such 
regulations  as  shall  secure  a  just  valuation  for  taxation  of  all  property, 
both  real  and  personal,  excepting  such  only  for  municipal,  educational, 
literary,  scientific,  religious,  or  charitable  purposes  as  may  be  specifically 
exempted  by  law. 

Sec.  3.  (To  the  same  effect  as  Iowa  Const.,  Art.  VII,  Sec.  7.) 

PENNSYLVANIA. 

Art.  IX,  Sec.  1.  All  taxes  shall  be  uniform  within  the  territorial  limits 
of  the  authority  levying  the  tax,  and  shall  be  levied  and  collected  under 
general  laws,  but  the  general  assembly  may,  by  general  laws,  exempt  from 
taxation  public  property  used  for  public  purposes,  actual  places  of  relig- 
ious worship,  places  of  burial  not  used  or  held  for  private  or  corpo- 
rate profit  and  institutions  of  purely  public  charity. 

Sec.  2.  All  laws  exempting  property  from  taxation,  other  than  the 
property  above  enumerated,  shall  be  void. 


780  APPENDIX. 

Sec.  3.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  any  contract  or  grant  to  which  the 
State  shall  be  a  party. 

RHODE  ISLAND. 

Art.  IV,  Sec.  15.  The  general  assembly  shall,  from  time  to  time,  pro- 
vide for  making  new  valuations  of  property,  for  the  assessment  of  taxes, 
in  such  manner  as  they  may  deem  best. 

SOUTH  CAROLINA. 

Art.  I,  Sec.  36.  All  property  subject  to  taxation  shall  be  taxed  in 
proportion  to  its  value. 

Art.  IX,  Sec.  1.  The  general  assembly  shall  provide  by  law  for  a  uni- 
form and  equal  rate  of  assessment  and  taxation  and  shall  prescribe  such 
regulations  as  shall  secure  a  just  valuation  for  taxation  of  all  prop- 
erty, real,  personal  and  possessory,  except  mines  and  mining  claims, 
the  proceeds  of  which  alone  shall  be  taxed,  and  also  excepting  such 
property  as  may  be  exempted  by  law  for  municipal,  educational,  literary, 
scientific,  religious  or  charitable  purposes. 

Sec.  5.  It  shall  be  the  duty  of  the  general  assembly  to  enact  laws 
for  the  exemption  from  taxation  of  all  public  schools,  colleges  and  insti- 
tutions of  learning,  all  charitable  institutions  in  the  nature  of  asylums 
for  the  infirm,  deaf  and  dumb,  blind,  idiotic  and  indigent  persons,  all 
public  libraries,  churches  and  burying  grounds;  but  property  of  associ- 
ations and  societies,  although  connected  with  charitable  objects,  shall 
not  be  exempt  from  State,  county  or  municipal  taxation :  Provided,  that 
this  exemption  shall  not  extend  beyond  the  buildings  and  premises  actu- 
ally occupied  by  such  schools,  colleges,  institutions  of  learning,  asylums, 
libraries,  churches  and  burial  grounds,  although  connected  with  chari- 
able  objects. 

SOUTH  DAKOTA. 

Constitution  of  1890,  Art.  IX,  Sec.  2,  All  taxes  to  be  raised  in  this 
State  shall  be  uniform  on  all  real  and  personal  property  according  to  its 
value  in  money,  to  be  ascertained  by  such  rules  of  appraisement  and  as- 
sessment as  may  be  prescribed  by  the  legislature  by  general  law,  so  that- 
every  person  and  corporation  shall  pay  a  tax  in  proportion  to  the  value 
of  bis,  her  or  its  property.  And  the  legislature  shall  provide  by  general 
law  for  the  assessing  and  levying  of  taxes  on  all  corporation  property  as 
near  as  may  be  by  the  same  methods  as  are  provided  for  assessing  and 
levying  of  taxes  on  individual  property. 

Sec.  3.  The  power  to  tax  corporations  and  corporate  property  shall 


APPENDIX.  781 

Dot  be  surrendered  or  suspended  by  any  contract  or  grant  to  which  the 
State  shall  lie  a  party. 

Sec.  4.  The  legislature  shall  provide  for  taxing  all  moneys,  credits, 
investments  in  bonds,  stocks,  joint-stock  companies,  or  other- 
wise ;  and  also  for  taxing  the  notes  and  bills  discounted  or  purchased, 
moneys  loaned  and  all  other  property,  effects,  or  dues  of  every  descrip- 
tion, of  all  banks  and  of  all  bankers,  so  that  all  property  employed  in 
banking  shall  always  be  subject  to  a  tax  equal  to  that  imposed  on  the 
property  of  individuals. 

Sec.  5.  The  property  of  the  United  States  and  of  the  State,  county 
and  municipal  corporations,  both  real  and  personal,  shall  be  exempt  from 
taxation. 

Sec.  6.  The  legislature  shall,  by  general  law,  exempt  from  taxation, 
property  used  exclusively  for  horticultural  societies,  for  school,  relig- 
ious, cemetery  and  charitable  purposes,  and  personal  property  to  any 
amount  not  exceeding  in  value  two  hundred  dollars,  for  each  individual 
liable  to  taxation. 

Sec.  7.  All  laws  exempting  property  from  taxation  other  than  that 
enumerated  in  sections  5  and  6  of  this  article,  shall  be  void 

Sec.  8.  (To  the  same  effect  as  Iowa  Const.,  Art.  VII,  Sec.  7,  supra.) 

Sec.  10.  The  legislature  may  vest  the  corporate  authority  of  cities, 
towns  and  villages  with  power  to  make  local  improvements  by  special 
taxation  of  contiguous  property  or  otherwise.  For  all  corporate  pur- 
poses, all  municipal  corporations  may  be  vested  with  authority  to 
assess  and  collect  taxes;  but  such  tax  shall  be  uniform  in  respect  to 
persons  and  property  within  the  jurisdiction  of  the  body  levying  the 
same. 

TENNESSEE. 

Akt.  II,  Sec.  28.  (In  addition  to  other  property,  this  section  authorizes 
the  legislature  to  exempt  "  one  thousand  dollars'  worth  of  personal  prop- 
erty in  the  hands  of  each  taxpayer,  and  the  direct  product  of  the  soil  in  the 
hands  of  the  producer  and  his  immediate  vendee.")  All  property  !?hall  be 
taxed  according  to  its  value,  that  value  to  be  ascertained  in  such  manner 
as  the  legislature  shall  direct,  so  that  taxes  shall  be  equal  and  uniform 
throughout  the  State.  No  one  species  of  property  from  which  a  tax  may 
be  collected  shall  be  taxed  higher  than  any  other  species  cf  property  of 
the  same  value.  But  the  legislature  shall  have  power  to  tax  merchants, 
peddlers  and  privileges  in  such  manner  as  they  may  from  time  to  time 
direct. 

The  portion  of  a  merchant's  capital  used  in  the  purchase  of  mer- 
chandise sold  by  him  to  non-residents  and  eeut  beyond  the  State,  shall 
not  be  taxed  at  a  rate  higher  than  the  ad  valorem  tax  on  property. 


782  APPENDIX. 

The  legislature  shall  have  the  power  to  levy  a  tax  upon  incomes 
derived  from  stocks  and  bonds  that  are  not  taxed  ad  valorem,  (This 
section  also  authorizes  a  poll  tax.) 

Sec.  30.  No  article  manufactured  of  the  produce  of  this  State  shall 
be  taxed  otherwise  than  by  inspection  fees. 


TEXAS. 

Art.  VII,  Sec.  1.  Taxation  shall  be  equal  and  uniform.  All  prop- 
erly in  this  State,  whether  owned  by  natural  persons  or  corporations, 
other  than  municipal,  shall  be  taxed  in  proportion  to  its  value,  which 
shall  be  ascertained  as  may  be  provided  by  law.  The  legislature  may 
impose  a  poll  tax.  It  may  also  impose  occupation  taxes,  both  upon 
natural  persons  and  upon  corporations,  other  than  municipal,  doing  any 
business  in  this  State.  It  may  also  tax  incomes  of  both  natural  persons 
and  corporations,  other  than  municipal,  except  that  persons  engaged  in 
mechanical  and  agricultural  pursuits  shall  never  be  required  to  pay  an 
occupation  tax :  Provided,  that  two  hundred  and  fifty  dollars'  worth  of 
household  and  kitchen  furniture,  belonging  to  each  family  in  the  State, 
shall  be  exempt  from  taxation,  and,  provided  further,  that  the  occupation 
tax  levied  by  any  county,  city  or  town,  for  any  year,  on  persons  or  cor- 
porations pursuing  any  profession  or  business,  shall  not  exceed  one-half 
of  the  tax  levied  by  the  State  for  the  same  period  on  such  profession  or 
business. 

Sec.  2.  All  occupation  taxes  shall  be  equal  and  uniform  upon  the  same 
class  of  subjects  within  the  limits  of  the  authority  levying  the  tax;  but 
the  legislature  may,  by  general  laws,  exempt  from  taxation  public  prop- 
erty used  for  public  purposes;  actual  places  of  religious  worship;  places 
of  burial  not  held  for  private  or  corporate  profit;  all  buildings  used  ex- 
clusively and  owned  by  persons  or  associations  of  persons  for  school 
purposes  (and  the  necessary  furniture  of  all  schools),  and  institutions  of 
purely  public  charity ;  and  all  laws  exempting  property  from  taxation, 
other  than  the  property  above  mentioned,  shall  be  void. 

Sec.  i.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  act  of  the  legislature,  by  any  con- 
tract or  grant  to  which  the  State  shall  be  a  party. 

Sec.  8.  All  property  of  railroad  companies  shall  be  assessed,  and  the 
taxes  collected  in  the  several  counties  in  which  said  property  is  situated, 
including  so  much  of  the  road-bed  and  fixtures  as  shall  be  in  each  county. 
The  rolling  stock  may  be  assessed  in  gross  in  the  county  where  the 
principal  ofiQce  of  the  company  is  located,  and  the  county  tax  paid  upon 
it  shall  be  apportioned  by  the  Comptroller  in  proportion  to  the  distance 
such  road  may  run  through  such  county,  among  the  several  counties 
through  which  the  road  passes,  as  a  part  of  their  tax  assets. 


APPENDIX.  783 

Sec.  10.  The  legislature  shall  have  no  power  to  release  the  inhabit- 
ants of,  or  property  in,  any  county,  city  or  town,  from  the  payment  of 
taxes  levied  for  State  or  county  purposes,  unless  in  case  of  great  public 
calamity  in  any  such  county,  city  or  town,  when  such  release  may  be 
made  by  a  vote  of  two-thirds  of  each  House  of  the  legislature. 

Sec.  17.  The  specifications  of  the  objects  and  subjects  of  taxation 
shall  not  deprive  the  legislature  of  the  power  to  require  other  subjects 
or  objects  to  be  taxed,  in  such  manner  as  may  be  consistent  with  the 
principles  of  taxation  fixed  in  this  constitution. 

Sec.  19.  Farm  products  in  the  hands  of  the  producer  and  family 
supplies  for  family  and  home  use  are  exempt  from  all  taxation  until 
otherwise  directed  by  a  two-thirds  vote  of  all  the  members  elected  to 
b')th  Houses  of  the  legislature.  Rev.  Stats,  1895,  p.  U2,  Ch.  9,  Sec.  544, 
545. 

UTAH. 

Art.  XIII,  Sec.  2.  All  property  in  the  State,  not  exempt  under  the 
laws  of  the  United  States,  or  under  this  constitution,  shall  be  taxed  in 
proportion  to  its  value,  to  be  ascertained  as  provided  by  law.  The  word 
property,  as  used  in  this  article,  is  hereby  declared  to  include  moneys, 
credits,  bonds,  stocks,  franchises  and  all  matters  and  things  (real, 
personal  and  mixed)  capable  of  private  ownership;  but  this  shall  not  be 
so  construed  as  to  authorize  the  taxation  of  stocks  of  any  company  or 
corporation  when  the  property  of  such  company  or  corporation,  repre- 
sented by  such  stocks,  has  been  taxed. 

Sec.  3.  The  legislature  shall  provide  by  law  a  uniform  and  equal  rate 
of  assessment  and  taxation  on  all  property  in  the  State,  according  to  its 
value  in  money,  and  shall  prescribe  by  general  law  such  regulations  as 
shall  secure  a  just  valuation  for  taxation  of  all  property;  so  that  every 
person  and  corporation  shall  pay  a  tax  in  proportion  to  the  value  of  his, 
her  or  its  property.  Provided,  that  a  deduction  of  debts  from  credits 
may  be  authorized.  Provided,  funher,  that  the  property  of  the  United 
States,  of  the  State,  counties,  cities,  towns,  school  districts,  municipal 
corporations  and  public  libraries,  lots  with  buildings  thereon  used 
exclusively  for  either  religious  worship  or  charitable  purposes,  and 
places  of  burial  not  held  or  used  for  private  or  corporate  benefit,  shall  be 
exempt  from  taxation.  Ditches,  canals  and  flumes  owned  and  used  by 
individuals  or  corporations  for  irrigating  lands  owned  by  such  individ- 
uals or  corporations,  or  the  individual  members  thereof,  shall  not  be 
separately  taxed  so  long  as  they  shah  be  owned  and  used  exclusively  for 
such  purpose. 
Sec.  4.  (Same  as  Montana  Const.,  Art  XII,  Sec.  17.) 
Sec.  10.  All  corporations  or  persons  in  the  State,  or  doing  business 


784  APPENDIX. 

therein,  shall  be  subject  to  taxation  for  State,  county,  school,  municipal 
or  other  purposes,  on  the  real  and  personal  property  owned  or  used  by 
them  within  the  territorial  limits  of  the  authority  levying  the  tax. 

Sec.  12.  Nothing  in  this  constitution  shall  be  construed  to  prevent  the 
legislature  from  providing  a  stamp  tax,  or  a  tax  based  on  income,  occu- 
pation, licenses,  franchises  or  mortgages. 

VERMONT. 

Chapter  I,  Art.  9.  Every  member  of  society  has  a  right  to  be  pro- 
tected in  the  enjoyment  of  life,  liberty  and  property,  and  therefore  is 
bound  to  contribute  his  proportion  towards  the  expense  of  that  protec- 
tion, and  yield  his  personal  service,  when  necessary,  or  an  equivalent 
thereto, but  no  part  of  any  person's  property  can  be  justly  taken  from 
him,  or  applied  to  public  uses  without  his  consent,  or  thac  of  the  repre- 
sentative body  of  the  freemen,  *  *  * ;  and  previous  to  any  law  being 
made  to  raise  a  tax,  the  purpose  for  which  it  is  to  be  raised  ought  to 
appear  evident  to  the  legislature  to  be  of  more  service  to  the  common- 
wealth than  the  money  would  be  if  not  collected. 

VIRGINIA. 

CoNSTiTUTiox  OF  1902.  BiLL  OF  RIGHTS,  Sec.  11.  No  pcrsou  Shall  be 
deprived  of  his  property  without  due  process  of  law. 

Article  II,  Section  21.  (The  payment  of  State  poll  taxes  at  least  six 
months  prior  to  election  during  three  years  preceding  the  offer  to  vote  is 
made  a  prerequisite  of  the  right  to  vote  after  January  1,  1904.) 

Article  III,  Sec.  50.  Every  law  imposing,  Tiontinuing  or  reviving  a 
tax  shall  specifically  state  such  tax  and  no  law  shall  be  construed  as  so 
stating  such  tax,  which  requires  reference  to  any  other  law  or  to  any 
other  tax. 

Article  VIII,  Sec.  128.  In  cities  and  towns  the  assessment  of  real 
estate  and  personal  property  for  the  purposes  of  municipal  taxation 
shall  be  the  same  as  the  assessment  thereof  for  the  purposes  of  State 
taxation,  whenever  there  shall  be  a  State  assessment  for  such  property. 

Article  XII,  Sec.  157.  (Annual  registration  fees  are  required  of  every 
domestic  corporation  and  foreign  corporation  doing  business  in  the  State, 
of  not  less  than  ^5  nor  more  than  S25,  which  shall  be  irrespective  of 
any  specific  licence  or  other  tax  imposed  by  law  upon  such  company  for 
the  privilege  of  carrying  on  business  in  the  State,  or  upon  its  franchise 
or  property ;  provision  to  be  made  therefor  by  general  laws.) 

Article  XIII,  Sec.  168.  All  property,  except  as  hereinafter  provided, 
shall  be  taxed;  all  taxes,  whether  State,  local,  or  municipal,  shall  be 
uniform  upon  the  same  class  of  subjects  within  the  territorial  limits  of 


APPENDIX.  785 

the  authority  levying  the  tax,  and  shall  be  levied  and  collected  under 
general  laws. 

Sec.  169.  Except  as  hereinafter  provided,  all  assessments  of  real 
estate  and  tangible  personal  property  shall  be  at  their  fair  market  value, 
to  be  ascertained  as  prescribed  by  law.  The  general  assembly  may  allow 
a  lower  rate  of  taxation  to  be  imposed  for  a  period  of  years  by  a  city  or 
town  upon  land  added  to  its  corporate  limits,  than  is  imposed  on  simi- 
lar property  within  its  limits  at  the  time  such  land  is  added.  Nothing 
in  this  constitution  shall  prevent  the  general  assembly,  after  the  first 
day  of  January,  nineteen  hundred  and  thirteen,  from  segregating  for  the 
purposes  of  taxation,  the  several  kinds  or  classes  of  property,  so  as  to 
specify  and  determine  upon  what  subjects,  State  taxes,  and  upon  what 
subjects,  local  taxes  may  be  levied. 

Sec.  170.  The  general  assembly  may  levy  a  tax  on  incomes  in  excess 
of  six  hundred  dollars  per  annum;  may  levy  a  license  tax  upon  any  busi- 
ness which  cannot  be  I'eached  by  the  ad  valorem  system;  and  may  impose 
State  franchise  taxes,  and  in  imposing  a  frauchifee  tux,  may,  in  its  discre- 
tion, make  the  same  in  lieu  of  taxes  upon  other  property,  iu  whole  or  in 
part,  of  a  transportation,  industrial,  or  commercial  corporation.  When- 
ever a  franchise  tax  shall  be  imposed  upon  a  corporation  doing  business  in 
this  State,  or  whenever  all  the  capital,  however  invested,  of  a  corporation 
chartered  under  the  laws  of  this  State,  shall  be  taxed,  the  shares  of  stock 
issued  by  any  such  corporation,  shall  not  be  further  taxed.  No  city  or 
town  shall  impose  any  tax  or  assessment  upon  abutting  land  owners  for 
street  or  other  public  local  irapi'ovements,  except  for  making  and  improv- 
ing the  walli  ways  upon  then  existing  streets,  and  improving  and  paving 
then  existing  alleys,  and  for  either  the  construction,  or  for  the  use  of 
sewers;  and  the  same  when  imposed,  shall  not  be  in  excess  of  the  pecu- 
liar beiielits  resulting  therefrom  to  such  abutting  land  owners.  Except 
in  cities  and  towns,  no  such  taxes  or  assessments,  for  local  public  im- 
provements shall  be  imposed  on  abutting  land  owners. 

Sec.  171.  The  general  assembly  shall  provide  for  a  reassessment  of  real 
estate,  in  the  year  nineteen  hundred  and  five,  and  every  fifth  year  there- 
after, except  that  of  railway  and  canal  corporations,  which,  after  January 
the  first,  nineteen  hundred  and  thirteen,  may  be  assessed  as  the  general 
assembly  may  provide. 

Sec.  172.  The  general  assembly  shall  provide  for  the  special  and  sep- 
arate assessment  of  all  coal  and  other  mineral  land ;  but  until  such  special 
assessment  is  made,  such  land  shall  be  assessed  under  existing  laws. 

Section  173.  (Provides  for  the  levy  by  the  general  assembly  of  a  State 
capitation  tax  not  exceeding  ^1.50  per  annum  on  every  male  resident  of 
the  State  of  not  less  than  21  years  of  age,  except  those  pensioned  by 
the  State  for  military  services,  $1  thereof  for  the  schools  and  the 
residue  to  be  applied  for  county  or  State  purposes;  but  this  capitation 

50 


786  APPENDIX. 

tax  is  not  to  be  collected  from  any  exempt  property.  An  additional 
capitation  tax  may  be  authorized  by  the  general  assembly  for  any  county 
or  city,  not  exceeding  $1  per  annum  on  every  resident,  to  be  applied  in 
aid  of  public  schools,  or  for  county  or  State  purposes.) 

Sec.  174.  After  this  constitution  shall  be  in  force,  no  statute  of  limita- 
tion shall  run  against  any  claim  of  the  State  for  taxes  upon  any  property; 
nor  shall  the  failure  to  assess  property  for  taxation  defeat  a  subsequent 
assessment  for  and  collection  of  taxes  for  any  preceding  year  or  years 
unless  such  property  shall  have  passed  to  Sibona  fide  purchaser  for  value, 
without  notice;  in  which  latter  case  the  property  shall  be  assessed  for 
taxation  against  such  purchaser  from  the  date  of  his  purchase. 

Sec.  176.  (The  roadbed,  real  estate,  rolling  stock  and  all  personal 
property  of  railway  corporations,  the  canal  bed  and  other  real  estate  of 
canal  companies,  is  to  be  valued  by  the  State  Corporation  Commission 
at  such  rates  of  taxation  as  may  be  imposed  by  them  respectively,  for 
State,  county,  city,  town  or  district  purposes,  upon  the  real  estate  and 
personal  property  of  natural  persons.  But  no  income  tax  is  to  be 
levied  upon  such  corporations.) 

Sections  177  and  178.  (Provide  for  an  annual  State  franchise  tax 
upon  railway  and  canal  corporations,  including  those  exempt  from 
taxation  as  to  their  works,  visible  property  or  proflts,  equal  to  one 
per  cent  upon  gross  receipts  for  the  privilege  of  exercising  franchises 
in  the  State,  these  gross  receipts  in  the  case  of  interstate  lines  being 
computed  upon  the  mileage  basis,  a  reasonable  deduction  being  made 
•'  because  of  any  excess  of  value  of  terminal  facilities  or  other  similar 
advantages  in  other  States  over  similar  facilities  or  advantages  in  this 
State."  This  franchise  tax  with  the  property  taxed  in  sections  176 
being  in  lieu  of  all  other  taxes  or  licenses  upon  the  corporate  fran- 
chises or  shares  of  stock  in  property,  but  does  not  exempt  from  the 
annual  corporation  fee  under  section  157,  nor  from  assessments  for 
street  and  other  public  local  improvements,  nor  does  it  effect  con- 
tracts made  with  municipalities  for  compensation  for  the  use  of  streets 
or  alleys.) 

(Under  sections  179  and  180  provision  is  made  for  annual  reports  of 
property  subject  to  taxation  and  for  the  collection  of  taxes  and  a  special 
procedure  is  authorized  for  the  judicial  determination  of  complaints 
of  tax  assessments.) 

Sec,  182.  Until  otherwise  prescribed  by  law,  the  shares  of  stock 
issued  by  trust  or  security  companies  chartered  by  this  State,  and  by 
incorporated  banks,  shall  be  taxed  in  the  same  manner  in  which  the 
shares  of  stock  issued  by  incorporated  banks  were  taxed,  by  the  law 
in  force  January  the  first,  nineteen  hundred  and  two;  but  from 
the  total  assessed  value  the  shares  of  stock  of  any  such  company 
or  bank,  there  shall  be  deducted  the  assessed  value  of  its  real  estate 


APPENDIX.  ^87 

otherwise  taxed  in  this  State,  and  the  value  of  each  share  of  stock  shall 
be  its  proportion  of  the  remainder. 

Sec.  183.  (This  section  contains  a  list  of  property  which,  and  which 
only,  shall  be  exempt  from  taxation,  State  and  local,  but  it  is  provided  that 
the  general  assembly  may  hereafter  tax  any  of  the  property  exempted 
except  property  directly  or  indirectly  owned  by  the  State  or  its  sub- 
divisions and  obligations  issued  by  the  State  since  February  14,  1882,  or 
hereafter  exempted  by  law.  The  exempt  property,  subject  however 
to  be  taxed  by  the  general  assembly,  includes  buildings  and  furniture  and 
furnishings  used  for  religious  worship  or  for  the  residence  of  the 
minister;  private  and  public  burying  grounds;  property  held  for  edu- 
cational or  charitable  purposes,  when  not  owned  by  corporations  having 
shares  of  stock,  and  permanent  endowment  funds  of  such  educational  or 
charitable  institutions.  *'But  the  exemption  mentioned  in  this  sub-sec- 
tion shall  not  apply  to  any  industrial  school,  individual  or  corporate,  not 
the  property  of  the  State,  which  does  work  for  compensation,  or  manu- 
factures and  sells  articles,  in  the  community  in  which  such  school  is 
located;  provided,  that  nothing  herein  contained  shall  restrict  any  such 
school  from  doing  work  for  or  selling  its  own  products  or  any  other 
article  to  any  of  its  students  or  employees."  It  is  also  provided  that  no 
inheritance  tax  shall  be  charged  directly  or  indirectly  against  any  legacy, 
when  devised  to  any  institution  whose  property  is  exempt  from  taxa- 
tion. Where  buildings  or  lots  are  leased  and  made  the  source  of 
revenue,  they  shall  be  subject  to  local  taxation.  ''  Obligations  issued 
by  counties,  cities,  or  towns  may  be  exempted  by  the  authorities  of 
such  localities  from  local  taxation.") 

Sec.  188.  No  other  or  greater  amount  of  tax  or  revenue  shall,  at  any 
time,  be  levied  than  may  be  required  for  the  necessary  expenses  of  the 
government,  or  to  pay  the  indebtedness  of  the  State. 

Section  189.  (Limits  the  rate  of  taxation  on  all  lands  and  improve- 
ments and  on  all  tangible  personal  property  not  exempt  from  taxation 
by  the  provisions  of  this  article.  A  special  tax  for  pensions  is  also 
authorized  for  a  limited  time.) 

WASHINGTON. 

Art.  VII,  Sec.  2.  The  legislature  shall  provide  by  law  a  uniform 
and  equal  rate  of  assessment  and  taxation  on  all  property  in  the  State, 
according  to  its  value  in  money,  and  shall  prescribe  such  regulations 
by  general  law  as  shall  secure  a  just  valuation  for  taxation  of  all 
property,  so  that  every  person  and  corporation  shall  pay  a  tax  in  pro- 
portion to  the  value  of  his,  her  or  its  property:  Provided,  that  a 
deduction  of  debts  from  credits  may  be  authorized;  Provided,  further, 
that  the  property  of  the  United  States,  and  of  the  State,  counties, 
school  districts  and  other  municipal  corporations,  and  such  other  prop- 


788  APPENDIX. 

erty  as  the  legislature  may  by    general  laws  provide,  shall  be  exempt 
from  taxation. 

Sec.  4.  (The  same  as  La.  Const.  1898,  Art.  228.) 

Sec.  5.  (The  same  as  Iowa  Const.  1857,  Art.  VII,  Sec.  7.) 

Sec.  9.  The  legislature  may  vest  the  corporate  authorities  of  cities, 
towns  and  villages  with  power  to  make  local  improvements  by  special 
assessment,  or  by  special  taxation  of  property  benefited.  For  all  cor- 
porate purposes,  all  municipal  corporations  may  be  vested  with  author- 
ity to  assess  and  collect  taxes,  and  such  taxes  shall  be  uniform  in 
respect  to  persons  and  property  within  the  jurisdiction  of  the  body 
levying  the  same. 

WEST  VIRGINIA. 

Art.  X,  Sec.  1.  Taxation  shall  be  equal  and  uniform  throughout  the 
State,  and  all  property,  both  real  and  personal,  shall  be  taxed  in  pro- 
portion to  its  value,  to  be  ascertained  asdirected  by  law.  No  one  species 
of  property  from  which  a  tax  may  be  collected  shall  be  taxed  higher 
than  any  other  species  of  property  of  equal  value;  but  property  used 
for  educational,  literary,  scientific,  religious  or  charitable  purposes; 
all  cemeteries  and  public  property  may,  by  law,  be  exempted  from 
taxation.  The  legislature  shall  have  power  to  tax,  by  uniform  and 
equal  laws,  all  privileges  and  franchises  of  persons  and  corporations. 

Sec.  2.  (Provides  that  a  capitation  tax  shall  be  levied  for  the  public 
schools.) 

Sec.  9.  The  legislature  may,  by  law,  authorize  the  corporate  authorities 
of  cities,  towns  and  villages,  for  corporate  purposes,  to  assess  and  col- 
lect taxes;  but  such  taxes  shall  be  uoiforra,  with  respect  to  persons  and 
property  within  the  jurisdiction  of  the  authority  levying  the  same. 

WISCONSIN. 

Art.  VIII,  Sec.  1.  The  rule  of  taxation  shall  be  uniform,  and  taxes 
shall  be  levied  upon  such  property  as  the  legislature  shall  prescribe. 

WYOMING. 

Art.  I,  Sec.  28.  All  taxation  shall  be  equal  and  uniform. 

Art.  XV,  Sec,  3.  All  mines  and  mining  claims  from  which  gold,  silver, 
and  other  precious  metals,  soda,  saline,  coal,  mineral  oil  or  other  valuable 
deposit,  is  or  may  be  produced,  shall  be  taxed  in  addition  to  the  surface 
improvements,  and  in  lieu  of  taxes  on  the  lands,  on  the  gross  product 
thereof,  as  may  be  prescribed  by  law;  provided,  that  the  product  of  all 
mines  shall  be  taxed  in  proportion  to  the  value  thereof. 


APPENDIX.  789 

Sec.  5.  (Requires  tne  imposition  of  a  poll  tax  for  sctiool  purposes.) 

Sec.  U.  All  property,  except  as  in  tbis  constitution  otherwise  provided, 
shall  be  uniformly  assessed  for  taxation,  and  the  legislature  shall  pre- 
scribe such  regulations  as  shall  secure  a  just  valuation  for  taxation  of 
all  property,  real  and  personal. 

Sec.  12.  The  property  of  the  United  States,  the  State,  counties,  cities, 
towns,  school  districts,  municipal  corporations  and  public  libraries,  lots 
wifh  the  buildings  thereon  used  exclusively  for  religious  worship,  church 
parsonages,  public  cemeteries,  shall  be  exempt  from  taxation,  and  such 
other  property  as  the  legislature  may  by  general  law  provide. 

Sec.  13.  (Same  as  Iowa  Const.  1857,  Art.  VII,  Sec.  7.) 

Sec.  14.  The  power  of  taxation  shall  never  be  surrendered  or  suspended 
by  any  grant  or  contract  to  which  the  State  or  any  county  or  other 
municipal  corporation  shall  be  a  party. 

ADDENDA. 

Discriminations  between  residents  and  non-residents: 

In  Sprague  v.  Fletcfher,  69  Vt.  69,  37  L.  R.  A.  840,  a  State  tax  allowing 
to  residents  the  deduction  of  debts  without  allowing  such  deduction  to 
non-residents  was  held  a  denial  of  the  equal  privileges  and  immunities 
of  citizens  guaranteed  by  the  United  States  Constitution,  Article  IV, 
Section  2.     See  §  458,  supra. 

MICHIGAN.  Constitutional  amendments  of  1900  (supra,  pages  265, 
772),  Public  Acts  of  Michigan,  1901,  p.  404. 

Art.  XIV,  Sec.  10.  (Authorizes  legislature  to  levy  specific  taxes  upoa 
corporations  and  to  tax  corporate  property  at  its  true  cash  value  through 
assessments  by  a  State  Board  of  Assessors.  Application  of  specific 
taxes  is  provided  for). 

Sec.  11.  The  legislature  shall  provide  a  uniform  rule  of  taxation, 
except  on  property  paying  specific  taxes,  and  taxes  shall  be  levied  on 
such  property  as  shall  be  prescribed  by  law;  Provided,  That  the  legis- 
lature shall  provide  an  uniform  rule  of  taxation  for  such  property  as 
shall  be  assessed  by  a  State  Board  of  Assessors,  and  the  rate  of  taxation 
on  such  property  shall  be  the  rate  which  the  State  Board  of  Assessors 
shall  ascertain  and  determine  is  the  average  rate  levied  upon  other  prop- 
erty, upon  which  ad  valorem  taxes  are  assessed  for  State,  county,  town- 
ship, school  and  municipal  purposes. 

Sec.  13.  (Provides  for  equalization  of  assessments  by  State  Board 
in  1901  and  at  five-year  intervals,  and  at  such  other  times  as  the 
Legislature  may  direct.) 


TABLE  OF  CASES  CITED- 


References 


A. 


Achison  v.  Huddleson   (12    How. 

293),  18. 
Adams   Express    Co.  v.   Kentucky 

(166  U.S.  171),  290,302, 

518. 
V.  Ohio  (165  U.  S.  194,    166  U. 

S.  217),  280,  285,  518. 
V.  Poe  (61  Fed.  Rep.  470),  285. 
Adams  v.  Nashville  (95  U.  S.    19), 

314. 
V.  Shelbyville   (154  Ind.  467), 

480. 
Adkins  u.  Richmond    (98   Va.   91; 

47  L.  R.  A.  583),  152. 
Aberdeen  Bank  V.  Chehalis  County, 

166  U.  S.  440),  320,  328, 

329. 
Albany    City     National    Bank     v. 

Maher  (9Fed.Rep.),884, 

394. 
Albertsont).  Wallace  (81 N.  C.  479), 

141. 
Albuquerque     National     Bank   v. 

Perea   (5  N.   Mex.    664; 

147  U.    S.  87),   305,  678, 

625,  715. 
Alexander    v.  Gordon     (101   Fed. 

Rep.  92,41  C.  C.  A.  228), 

402. 
Allen  V  Drew  (44  Vt.  174),  433. 
V.  Jay  (60  Me.  124),  422. 


are  to  Pages. 

I   Allen  V.  National  State  Bank   (92 

Md.    509,    52    L.    R.    A. 

760),  514. 
V.  Pullman  Car  Co.  (139  U.  S. 

658),  710. 
Almy  V.  California  (24  How.  169), 

113. 
American  Coal  Co.  v.  County  Com- 
missioners (59  Md.  185, 

194),  309. 
American  Fertilizing  Co.  v.  Board 

of  Agriculture  (43   Fed. 

R.  609),  117j  135, 
American  Harrow  Co.   v,   Shaffer 

(68  Fed.  Rep.  750),  158, 

166. 
American  Refrigerator  Transit  Co. 

V.    Hall  (174   U.   S.  70), 

246. 
American    Sugar    Refining  Co.  v. 

Louisiana  (179  U.  S.  89), 

573. 
American  Transit  Co,  v.  Thomas 

(63Pac.  Rep.  410),  382. 
Amery  v.    Keokuk    (72  Iowa,  710), 

468. 
Ames  V.  People  (25  Colo.  508) ,  145. 
Amy  V.  Supervisors  (11  Wall.  136), 

737. 
Anniston  v.   Southern    R.  R.  Co., 

(112  Ala.  557),  233. 
Antoni    v.    Greenhow    (107   U.  S. 

709),  57. 

(791) 


792 


TABLE  OF  CASES  CITED. 


References 

Arkansas  B.  &  L.  Ass'n  v.  Madden 

(175  U.  S.  269),  710. 
Arkansas  v.  Kan  as  &  Texas  Coal 

Co.  (183  U.   S.  185),  699. 
Armstrong  v.   Athens    County  (16 

Peters,  281),  82. 
Arnold  v.  Yanders   (56  Ohio,  417), 

169. 
Arrowsmith    v.    Harmonning    (118 

U.  S.  194),  355. 
Asher  v.   Texas    (128  U.    S.   129), 

150,  714. 
Asher,   In  re  (23  Texas  App.  662), 

152. 
Ashley  v.  Ryan  (153  U.  S.  436),  196. 
Assessment,  In  re  (4  So,   Dak.  6), 

590. 
Asylum  v.  New   Orleans  (105  U.  S. 

362),   53. 
Atchison,  Topeka  &  Santa  Fe  R.  R. 

Co.   V.  Clark  (60  Kansas, 

826),  605. 
V.   Matthews    (174    U.    S.  96), 

578. 
Augusta,  City   of  v,  McKibben  (22 

Ky.    Law  Rap.  122),  480. 
Austin  u.  Alderman  (14  Allen,  359, 

also  7  Wall.  694),  306. 
V.  Tennessee    (179   U.  S.  343), 

118,  124. 
Ayers,  In  re  (123  U.   S.  443)  ,  721, 

723,  724,  735. 

B. 

Bacon  v.  Board  of  State  Tax  Cora  - 

missioners     (85  N.    W. 

Rep.  307),  539. 
Bagnall  v.  The  State  (25  Wise.  112, 

154  U   S.  681),  329. 
Bakery.  Grice  (169  U.  S.  284),  714. 
V.  King  County  (17  Wash.  622), 

301. 
V.  Lexington   (53    S.  W.   Rep. 

16,  21  Ky.  L.  R.  809),  83. 


are  to  P«ages. 

Bailey  v.  Maguire  (22  Wall.  215), 

87. 
Baldwins.  State  (89  Md.  587),  522. 
Bill  V.    Ridge    Copper    Co.     (118 

Mich.  7),  399. 
Baltimore  &  Ohio  R.  Co.  v.  Baugh 

(149  U.  S.  368),  731. 
Baltimore  v.  Scharf  (54  Md.    499), 

454. 
Bamberger  v.  Schoolfleld  (160  U.  S. 

149),  187. 
Bank    of    Augusta    v.    Earle    (13 

Peter.^,519),  173- 
Bank   of  Commerce   v.  New  York 

City  (2  Black,  620),  18. 
V.  Tennessee    (161    U.  S.   134, 

144),  63,  89,  93. 
Bank    of     Redemption    v.    Boston 

(125  U.  S.60),  308,322. 
Bank  v.  Mayor  (7  Wall.  16),  15. 
V.  Supervisors  (7  Wall,  26),  15. 
V.  Tennessee   (104  U.  S.  293). 

87. 
Bank  Tax  Case  (2  Wall.  200),  19. 
Banncn  v.    Burns   (39  Fed.    Rep. 

892),  26,  399. 
Barber  Asphalt  Co.  v.  Rich  (68  S. 

W.  Rep.  1043),  474. 
Barbier    v.  Connolly    (113    U.    S. 

27,  31),  560. 
Barrett  v.  Holmes  (102  U.  S.  .^61), 

402. 
Barron  v.  Burnside  (121  U.  S.  186), 

181. 
Bartmeyer  v.  Iowa  (18  Wall.  129), 

527. 
Bartlett  v.  Wilson  (59  Vt.  23),  374. 
Bauman  v.  Ross    (167  U.   S.  648), 

459,  462. 
Baxter    v.  Thomas  (4   Okla.  605), 

152. 
Beck  V.  Obst  (12  Bu-h,  268),  464. 
Beer    v.   Massachusetts  (97  U.  8. 

25),  527. 


TABLE  OF  CASES  CITED. 


793 


Etfereiiees  are  to  Pages. 


Beeson    v.  Johns    (124  U.  S.   56), 

597,  716, 
Bellingam   Bay,    etc.,  Co.  v.  New 

Whatcomb    (172    U.    S. 

314),  386,  459,  465. 
Bell's    Gap  R.  K.  Co.  v.   Pennsyl- 
vania   (134  U.    S.   232), 

510,  565,  587. 
Bennett  v.    Davis    (90    Me.    102), 

397. 
Betman  v.  Warwicli,  47  C.   C.   A. 

185;   108  Fed.  Rep.  46), 

670. 
Billings  V.    People    (189  111.  472), 

582. 
Birmingham  v.  Klein  (89  Ala.  4'6l), 

454. 
Blair  v.  Cuming  Co.  (Ill  111.  363)' 

410. 
Blake  v.  McClung  (172  U.  S.  239, 

261),  357.  - 
Bliss,  In  re  (63  N.  H.  135),  141,  145. 
Bloomington  v.  B  )urland  (137  111. 

534),  151. 
Board  of    Assessors  v.   Pullman's 

Palace  Car  Co.  (8  C.  C. 

A.  490), 246. 
Board  of  Commissioners   v.   King 

(14  C.  C.  A.  421),  71^9. 
V.  Lucas  (93  U.  S.  108),  79. 
Board  of  Commissioners  of   Rice 

County  V.   Faribault  (23 

Minn.  ^Q),  342. 
Board  of  Directors  v.   Collins  (46 

Neb.  411),  446. 
Board  of  L  quidation  v.  Louisiana 

(163  U.  S.  416),  89. 
V.  Louisiana  (1 79  U.  S.  622),  66. 
u.  McComb  (92  U.  S.  531),  722. 
Board  of   Selectmen   v.    Spaldin;;;. 

(8  La.  Ann.  87),  205. 
Board  of   Supervisors   v.  Railroad 

Co.  (44  111.  229),  620. 
Boardman  v.   County   Supervisors 

(85  N.  Y.  359,  363), 542. 


Bogart  V.   The   State   (Com.  PI.), 

(20  Weekly  L.  Bui.  458), 

239. 
Bonaparte  v.  Tax  Court  (104  U.  S. 

592),  541. 
Booth  V.  Lloyd  (33  Fed.  Rep.  598), 

206. 
V.  Woodbury  (32   Conn.  118), 

423. 
Borland  v.  Boston  (132  Mass.  89), 

530. 
Boston  V.  Beal  (5  C.  C.  A.  26),  301. 
Bowman  v.  Railway  Co.  (125  U.  S. 

508),  110. 
Boyd  V.   Selma    (16  L.  R.  A.  729), 

542. 
Boyer  v.  Boyer  (113  U.  S.  689),  315. 
Bradley  v.  Bander  (36  Ohio  St.  28), 

539. 
V.   People    (4  Wall.  459),  310, 

312. 
Branch  v.  City  of  Charleston  (92  U. 

S.  677),  90. 
Brennan   v.  Titusville    (153   U.    S. 

289),  151. 
Bressler  v.  Wayne  County  (32  Neb. 

834;  13  L.  R.A.  614),  328. 
Bridge  Proprietors  v.  Hoboken  Co. 

(I  Wall.  116),  61. 
Bridge  Co.,  Ex  parte  (62  Ark.  461), 

620. 
Briggs  V.  Johnson  County  (4  Dillon, 

148),  420. 
Bristol  V.  Washington  County  (177 

U.  S.  133),  503,  504,  508. 
Broadway  Baptist  Church  v.  McAtee 

(8  Bush,  508),  464. 
Bronsou  v.  Kiuzie  (1  How.  311),  75. 
Bronson,  In  re  (150  N.  Y.  1,  and  34 

L.  R.  A.  238),  549. 
Brooks  V.  State  (Texas)    (58  S.  W. 

Rep.  1033),  301. 
Brown  v.  Houston  (114  U.  S.  622, 

630),  115,  680. 


794 


TABLE  OF  CASES  CITED. 


References  are  to  Pages. 


Brown  v     Maryland  (12  Wheaton, 

419),  13,  97, 104. 
Brown,  Ex  parte  (48  Fed.  Rep.  435), 

161. 
Buck  V.  Miller  (147  Ind.  586,  37  L. 

R.  A.  384),  506. 
Buffalo  V.  Reavey  (55  N.  Y.  S.  792), 

142. 
Buie  V.  Coramissioners  of  Fayette- 

ville  (79  N.  C.  267),  306, 

307. 
Burgess  v.  Seligman  (107  U.  S.  20), 

731. 
Burlington  Township  V.  Beasley  (94 

U.  S.  310),  410. 
Burroughs  v.  Smith  (95  Va.  694), 

328. 
Burr's  Estate,  In  re  (38  N.  Y.  Supp. 

811),  548. 
Buzard  v.  Houston  (119  U.  S.  347), 

709. 

c. 

California  v.  Pacific  R.  R.  Co.  (127 

U.  S.  3),  32. 
California  &  Or.  Land  Co.  v.  Gowan 

(48  Fed.  Rep.'  771),  627, 

716. 
Canal  &  Banking  Co.  v.  New  Orleans 

(99  U-  S.  97),  734. 
Cannon  &  New  Orleans    (20  Wall. 

577),  215. 
Cardwell   v.  American  Bridge  Co. 

(113  U.  S.  205),  209. 
Carey  v.  Houston  &  Texas  Ry.  Co. 

(150  U.  S.  171),  696. 
Carpenter  w.  Pennsylvania  (17  How. 

456),  78. 
Carrier  v.  Gordon   (21   Ohio,  605), 

125. 
Carroll  v.  Alsup  (Tenn.)  (64  S.  W. 

Rep.  193),  600. 

V.  Safford  (3  How.  4tl),  23. 

CarroUton    v.   Bazzette     (159     111. 

284),  162. 


Carson  v.  Brockton  Sewerage  Co. 

(182  U.  S.  398),  459,  460. 
Carter  v.  Texas  (177  U.  S.  442),  702. 
Carthage  v.  First  National  Bank  of 

Carthage    (71  Mo.    508), 

301. 
V.  Frederick    (122   N.   Y.  268), 

457. 
Cass  Farm  Co.  v.  Detroit  (124  Mich. 

433),  480,  483. 
Castillo   V.  McConnico    (168   U.  S. 

674),  369,  399. 
Catlin  V.  Hull  (21  Vt.  152),  503, 
Central  Land  Co.  v.  Laidley  (159  U. 

S.  103),  355,  706,  732. 
Central  Pacific  R.  R.  Co.  v.  Cali- 
fornia (162  U.  S.  91),  34. 
V.  Nevada  (162  U.  S.  512),  26, 

27.  • 
Central  R.  R.  Co.  v.  Assessors  (48 

N.  J.  L.  1),  615. 
Central  R.   R.    &  Banking   Co,   v. 

Georgia  (92  U.  S.  665), 

90. 
Central  Trust  Co.  v.  Wabash  Ry. 

Co.    (26  Fed.  Rep.   11), 

724. 
Chamberlain,  Ex    parte    (55    Fed. 

Rep. 704),  522. 
Champaign  County  Bank  v.  Smith 

(7  Ohio  St.  42),  73. 
Chappell  V.  United  States  (160  U. 

S.  510),  25. 
Charles  v.   Marion   City    (98   Fed. 

Rep.  166),  479. 
Charleston     v.     Peoples    National 

Bank  (5  S.  C.  103),  308. 
Charlotte  R  R.  Co.  ■;;.  Gibbes  (142 

U.  S.  386),  356,  570. 
Cheaney  u.  Hooser  (9   B.  Monroe, 

330,  p.  341),  405. 
Cheatham  v.  United  States  (92  U. 

S.  89),  693. 
Chesapeake  &  Ohio  R.   R.   Co.  v. 

Miller  (114  U.S.  176),  89. 


TABLE  OF  CASES  CITED. 


795 


References  are  to  Pages. 


Chicago  V.  Blair  (149  III.  310),  456. 

V.    O'Brien  (111  111.  532),  457. 
Cbicago  B.  &  K.  Ry.  Co.  v.  Guffey 

(120  U.  S.  569),  86. 
Chicago  B.  &  Q.  II.  R.  Co.  v.  Board 

of     Commissioaors    (54 

Kans.  781),  621. 
V.  Chicago  (166  U.  S.  226,  23'3), 

355,369,  370,701. 
V.     Commissiouers      Republic 

City  (67  Fed.  R.  411  and 

14  C.  C.  A.  456).  622. 
Chicagq   &  N.    W.    R.    R.    Co.   v. 

Ctiicago  (164  U.  S.  454), 

700. 
Chicago    Union    Traction    Co.    v. 

State   Bd.    of    Equaliza- 

tion  (112  Fed.  R-p.  607; 

114  Fe. I.   Rep.  557),  629, 

6.30. 
Chilvers  v.  People    (11  Mich.  43), 

205. 
Chinese  Exclusion  Case  (130  U.  S. 

581),  668. 
Chisholm  v.  Georgia  (2  Dallas,  419), 

719. 
Christensen,    la  re    (85  Cal.   208), 

168. 
Church  V.  Rowell  (49  Me.  367),  531. 
Cincinnati  C.  C.  &  St.  L.  1^  Co.  v. 

Backus    (lot  U.   S.  439, 

445),  237,  271,  285. 
Citizens'  National  Bank   v.  Loftin 

(85  lud.  341),  342. 
Citizens'  Savings  Bank  v.  Owens- 

boro  (173  U.  S.  636),  63. 
Citizens'  Street  Ry.   Co.   v.  Com- 
mon Council  (125  Mich. 

673),  544. 
City  of  Covington  v.  Southgate  (15 

B.  Monroe,  491),  405. 
City  National  Bank  v.  Paducah  (1 

Nat.   Bank   Cases,    30), 

341. 


Clark   V.    Kansas  City    (i76  U.  S. 

114),  580. 
V.  McGhee   (31  C  C.  A.  321), 

724. 
V.  Mobile  (67  Ala.  317),  177. 
V.  Titusville    (184  U.    S.  329), 

586. 
Claybrook  v.  City  of  Owensboro  (16 

Fed.  Rep.  297),  602. 
Cleveland  Trust  Co.  v.  Lander  (62 

Ohio  St.  266),  327. 
Clyde  S.  S.  C  >.  v.  City  Council  of 

Charleston  (76  Fed.  Rep. 

46),  203. 
Coates  t;.  Campbell  (37  Minn.  498), 

422. 
Cocheco  Co.  v.  Stratford  (51  N.  H. 

455),  620. 
Coe?;.  Errol  (116  U.  S.   517),  126, 

245,  500,  662. 
V.    Simmons  (3    Pa.    Dist.    Ct. 

792),  141. 
Coitu.  Sutton  (102  Mich.  324),  172. 
Coleu.  La  Grange    (113   U.  S.  1), 

410. 
V.  Rindolph  (31  La.  Ann.  535), 

162. 
Collector  v.   Day   (11    Wall.    113), 

669. 
Colorado   Central    Mining    Co.    v. 

Turck   (150  U.    S.    138, 

143),  698. 
Columbus    Southern     R.     Co.     v. 

Wright  (151  U.    S.  470), 

569. 
Commercial  Bank  v.  Chambers  (182 

U.  S.  556),  309,  320. 
Commonwealth  v.   American   Bell 

Tel.  Co.   (129  Pa.   217), 

188. 
V.  Bank  (2  Pearson,  386),  307. 
V.  Brush  Elec.  Light  Co.  (145 

Pa.  147),  37. 
u.  Central  D.  &P.  Co.  (145  Pa- 

121),  36. 


796 


TABLE  OF  CASES  CITED. 


References  ar 

Commonwealth  v.   Clark  (195  Pa. 

St.  634),  600. 

U.Crane  (158  Mass.  218;,  674, 

V.    Delaware    Div.   Canal   Co. 

(123  Pa.  St.  594,  2  L.  R. 

A.  798),  610,  591. 

V.  Edgerton  Coal  Co.,   164  Pa. 

St.  281),  600. 
V.  Electric  Co.    (151   Pa.  265), 

36. 
V.   Harmel    (166  Pa.  89),  145, 

166. 
V.  Harlman  (7  Pa.  118),  420. 
V.  Myer  (92  Va.  809),  141. 
V.  Newhall  (164  Mass.  338),  67. 
V.  Ober  (12  Cash  (Mass.)  493), 

162. 
V.  Petty  (96  Ky.  452,  29    L.   R. 

A.  786),  36. 
V.  Schollenberger(156Pd.  201), 

120. 
V.  Smith  (92  Ky.  38),  230. 
V.  Suyder  (182  Pa.  St.  630),  142. 
V.  Standard   Oil    Co    (101    Pa. 
119),  188,  190,  582. 
Conde  v.  City  of  Schenectady  (164 

N. Y.  258),  480. 
Connolly  v.  Union  Sewer  Pipe  Co. 
(184  U.  S.,  p.  558),  366, 
559,  575. 
Conway  v.    Taylor   (1  Black,  603), 

209. 
Cooktj.  Pennsylvania  (97  U.  S.  566, 

574),  98, 124. 
Cooley  V.   Board  of   Wardens    (12 

How.  299),  110,  221. 
Cooper  Manufacturing  Co.  v.  Fer- 
guson   (113    U.   S.  727), 
187. 
Cope,  In   re  Estate  of  (191  Pa.  1; 

45  L.  R.  A.  316),  585. 
Corry  v.  Campbell  (154  U.  S.  629), 

459,  464. 
Corson  u.  Maryland  (120  U.  S.  602), 
150. 


e  to  Pages. 

Cosier  v.  McMuUau  (22  Mont.  484), 

30.      . 
Cotting  V,  Kansas  City  Stock  Yards 

(183  U.  S.  79),  366, 
Coulter  V.  Stafford  (6  C.  C.  A.  18), 

80. 
County  V.  Miller  (7  Kan-sas,   479), 

410. 
County  Commissioners  of  Frederick 

Co.  V.   Farmers    &  Me- 
chanics   Bank    (43    Mi. 

117),  241. 
County  of   Lancast'T  v.   Lancaster 

County  Nat.  Bank  (2  Na- 
tional Bank  Cases,  415), 

313. 
Covington  v.  Kentucky  (173   U.  S. 

231),  79,  82,  209. 
Covington  Bridge  C6.  v.  Kentucky, 

(154  U.S.  204,  211),  221. 
Covington  City  Nat'l   Bank  v.  Cov- 
ington (21  Fed.  Rep. 484), 

301. 
Cowley  V.   Spokane    (99  Fed.  Rep. 

810),  479. 
Crandall  u.  Nevada  (6  Wall.  35) ,  22, 

134,  139,  240. 
Cribbs   v.  Benedict  (64  Ark.  555), 

598. 
Cross  V.  Harrison  (16  How.  164), 

658. 
Crown  Cork  Seal  Co.  u.  Maryland 

(87  Md.  687),  37. 
Croy  V.  Obion  County  (104  Tenn. 

425), 160. 
Crutcher  v.  Kentucky  (141 U.  S.  47, 

57),  230,  680. 
Cullman  v.  Arndt  (125  Ala.    581), 

168. 
Cumberland  &  Pennsylvania  R.  R. 

Co,  V.  Maryland  (92  Md. 

668,  and62L.R.  A.  764), 

260. 
Camming  v.  Board  of  Education 

(175  U.  S.  638),  604. 


TABLE  OF  CASES  CITED. 


797 


References  are  to  Pages. 


Cummings  v.  National  Bank  (101 

U..S.  153),  332,  616,  625, 

719. 
Cunningham  v.  Macon  &  Brunswick 

R.  R.  Co.  (109  U.S.  446), 

719,  721. 
Curry  v.  Spencer  (61 N.  H .  624),  582. 
Curtis  V.  Whipple  (24  Wise.  350), 

420. 
V.  Whitney  (13  Wall.  68),  80. 

D. 

Daggett  V.   Colgau  (92   Cal.  53,  14 

L.  R.  A.  475),  423. 
Dallinger  ??.  Rapello  (14  Fed.- Rep. 

32,   15  Fed.    Rep.    434), 

536. 
Daniels  v.   State    (150    Ind.    348), 

602. 
DartmouthCollegeCase(4Wheaton 

518,  581),  373. 
Davenport  Bank  v.  Davenport  Board 

of   Equalization  (125  U. 

S.  83),  322. 
Davidson  v.    New  Orleans  (96  U. 

S.    97),    353,    365,    372, 

375,    411,    442,  443,    459, 

547,  561,  595,  704,  706. 
V.  Wright  (16  D.  C.  App.  371), 

479. 
Davis  V.  Elmira  Savings  Bank  (161 

U.  S.  276), 297. 
V.  Weidbold  (139  U.  S.  507),  28. 
Deal  V.    Mississippi    County    (107 

Mo.    464,    14   L.    R.    A. 

622),  422. 
Delaware   Railroad  Tax  (18  Wall. 

206),  250,  262. 
De  Lima  v.  Bidwell  (182  U.  S.  1), 

659. 
Denver  v.  Knowles  (17  Colo.  204), 

454. 
Desmare  v.   United  States  (93  U. 

S.  605),  532. 


Detroit  v.   Parker  (181  U.  S.  399), 

483. 
De  Vignier  v.   New    Orleans   (16 

Fed.  Rep.  11),  74. 
Dewey  v.  Des   Moines  (173   U.  S. 

193),  44 i,  508,  509. 
Dize  V.   Lloyd  (36  Fed.  Rep.  651), 

206. 
Dobbins  v.  Erie  County  (16  Peters, 

435),  17,  669,  677. 
Dodge   V.    Mission  Township    (46 

C.   C.  A.  661,  54  L.R.  A. 

242),  420. 
V.    Woolsey    (18    How.    331), 

48,  732. 
Dooley    v.   United  States  (182  U- 

S.    222),    657,   659,    665, 

681. 
V.   United    States    (183  U.    S. 

151.  174),  7,  106. 
Douglas  County  v.  Commonwealth 

(97  Va.  3'.)7),391. 
Dower  V.  Richards  (151  U.S.  658), 

703. 
Downes  v.  Bidw.  11  (182  U.  S.  214), 

7,  652,  659,  661,  697. 
Downham  v.  Alexandria  (10  Wall. 

173),  146. 
Dows  V.  Chicago   (11  Wall.    109), 

710,  739. 
Doyle  V.  Insurance   C ).    (94  U.  S. 

535),  181. 
Draper  V.  Hatfleld  (124  Mass.  53), 

532. 
Dred  Scott  Case  (20  How.  1),  .348. 
Ducat  V.  Chicago  (10  Wall.  410), 

174. 
Duluth,  etc.,  R.  R.  Co.  v.  Minnesota 

(179  U.  S.  302),  69. 
Duncan  v.  Missouri  (152  U.  S.  382), 

351. 
Dundee   Co.  v.  Charlton    (32  Fed. 

Rep.  192),  716. 


798 


TABLE  OF  CASES  CITED. 


References  are  to  Pages, 


Dundee  Mortgage  &  Trust  Co.  v. 

Parrish    (24    Fed.   Rep. 

197),  559,  627. 
Dundee    Mortgage  Co.   v.   School 

District  No.   1  (18  Fed. 

Rep.  389;    21   Fed.  Rep. 

151),  514. 
Dutton  V.  Citizens'  National  Bank 

(53  Kansas  440),  308. 
Dwight  u.  Mayor  (12  Allen  (Mass.) 

316),  539. 
Dyar  v.  Farmingtoo  Village,  70  Me. 

515),  439. 
Dyer  v.   Osborne   (11  R.  I.   321), 

539. 

E. 

East  St.  Louis  v.  United  States  ex 

rel.  Zebley    (110  U.     S. 

321),  729, 
Eberly,  In  re   (98  Fed.  Rep.  295), 

602. 
Egan  V.  Clark  (165  U.  S.  188),  703. 
Eidman  v.  Marlintz  (184  U.  S.  578), 

533,  550,  684. 
Ellis  V.  Frazier  (Or.)  (53  L.  R.   A. 

454),  564. 
Emertu.  Missouri  (156  U.  S.  296), 

162. 
Empire   Milling  &  Mining  Co.   v. 

Tombstone     (100     Fed. 

Rep.  910), 187. 
Engelke   v.    Schlenker    (75  Texas, 

559),  332. 
Erie  v.  Russell  (148   Pa.  384),  457. 
Erie  County  v.  City  of  Erie  (113  Pa. 

St.  360),  552. 
Erie  R.  R.  Co.  v.  Pennsylvania  (21 

Wall.  492),  65. 
V.    Pennsylvania    (153     U.    S. 

628),  510. 
V.  Pennsylvania  (158  U.  S.  437), 

223. 
V.  Purdy   (185    U.  S.  148),  702. 


Escanaba     Company    v.      Chicago 

(107    U.    S.  678),  4,  207, 

219. 
Essex  Public  Road  Board  v.  Skinkle 

(140U.  S.  334),  80. 
Evans  v.  Fall  River  Co.  (9  So.  Dak. 

130),  380,  395. 
Evansville  Bank  v.  Britton  (105  U. 

S.  322),   325. 
Ewing  u.   St.  Louis  (5  Wall.  418), 

717. 
Exchange  Bank  Tax  Cases  (21  Fed. 

Rep.  99),  395. 
Exchange  National  Bank  v.  Miller 

(19   Fed.  Rep.  372),  312, 

335. 
Express  Co.  v.  Allen  (39  Fed.  Rep, 

712),  234, 
Eyre   v.   Jacob  (14   Grattan  (Va.) 

422),  582. 

F. 

Fagan  v.  Ohio  Humane  Society  (6 
Nisi  Prius,  357),  380. 

Fair,  Estate  of  (128  Cal.  607),  545. 

Fairbank  v.  United  States  (181  U. 
S.  283),  131,  663,  682. 

Fallbrook  Irrigation  District  v. 
Bradley  (164  U.  S.  112), 
370,  411,  412,  445,  459, 
467,  475,  707,  708. 

Fargo  V.  Michigan  (121  U.  S.  230), 
250,  254, 

Farrarw.  St,  Louis  (80  Mo.  379), 
457, 

Farrell  v.  West  Chicago  Park  Com- 
missioners (181  U,  S. 
404),  459,464,  480,  483, 

Farrington  v.  Tennessee  (95  U.  S. 
689),  91. 

Fay  V.  Springfield  (94  Fed.  Rep. 
409),  479. 

Fechheimer  v.  City  of  Louisville 
(84  Ky.  306),  142. 


TABLE  OF  CASES  CITED. 


799 


References  are  to  Pages. 


Ferry  v.  Campbell  (110  Iowa,  290), 

380. 
Ficklen  v.   Shelby  County  Taxing 
District  (145   U.    S.    1), 
152. 
Field  V.  Clark  (143  U.  S.  649),  641, 

666. 
Findlay  v.  McAllister   (113   U.  S. 

104),  728. 
Fire  Department   of   New  York  v. 
Stratton  (159  N.Y.  225), 
601. 
First  National   Bank   v.   Chapman 
(173  U.  S.  205),  320. 
V.  Chehalis   County  (6    Wash. 

64),  305. 
V.  Concord  (59  N.  H.  75),  307. 
V.  Fancher  (48  N.  Y.  524),  305. 
V.  Lindsay  (45  Fed.  Rep.  619), 

335. 
V.  Province  (20  Montana,  374), 

301. 
V.  Richmond  (42  Fed,  Rep.  877; 

39  Fed.  309),  305. 
V.  San  Francisco  (129  Cal.  96), 

301,  302. 
V.   Stone  (88  Fed.    Rep.    409)^ 

303. 
V.  Turner  (154  lud,  456),  328. 
First  National  Bank   of  Chicago  v. 
Farwell     (7    Fed.    Rep. 
518),  335. 
First  National  Bank  of  Hannibal  v. 
Merideth   (44   Mo.   500), 
305. 
First  National  Bank  of   Omaha  v. 
Douglas  County  (3  Dil- 
lon, 330),  305. 
First  National  Bank  of  Toledo  v. 
Lucas   County    (25  Fed. 
Rop.  749),  335,  337. 
First  National  Bank  of  Wilmington 
V.  Herbert  (44  Fed.  Rep. 
153),  313. 


First  National  Bank  of  Youngstowu 

V.  Hughes  (6  Fed.  Rep. 

737),  345. 
Fleming  v.  Page  (9.  How.  603),  658. 
Fletcher  u.  Peck  (6  Cranch,87),44. 
Flint  V.  Board  of  Aldermen  of  Bos- 
ton (99  Mass.  141),  306. 
Florida  Central  R.  R.  Co.  v.  Rey- 
nolds   (183   U.    S.   471), 

567. 
Fong  Yue  Ting  v.   United   States 

(149  U.  S.  721),  668. 
Forbes  v.  Gracey  (94  U.  S.  762)  28. 
Ford  V.  Delta  &  Pine  Land  Co.  (164 

U.  S.  662),  86. 
Foreign  Held  Bond  Case  (15  Wall. 

300),  71,  74. 
Forsythe  v.  Haramong  (68  Fed.  Rep. 

774),  440. 
Fort    Leavenworth    R.   R.    Co.  v. 

Lowe  (114  U.S.  525),  25. 
Fort    Scott    V.    Pelton    (39    Kans. 

764),  152. 
Foster    v.    Com.   of    Pilotage    (22 

How.  245),  221. 
Fourteen  Diamond  Rings  (183  U. 

S.  177),  661. 
Fraser  v.  McConway  (82  Fed.  Rep. 

257),  526,  596. 
Frayser  v.  Russell  (3  Hughes,  227), 

735. 
Frederickson  v.  Louisiana  (23  How. 

445),  40. 
Freeland    v.    Ha-tings     (10  Allen, 

570),  423,  740. 
French  v.  Barber   Asphalt  Paving 

Co.    (158    Mo.    354,     181 

U.  S.  324),  437,  459,  480, 

481,482. 
V,  State  (52  L,  R.  A.  160),  166. 
Frere  v.  Von  Schoeler  (47  La.  Ann. 

324),  2C4. 
Fiiller'.s   E>^t:ite,   In   ro    (70   N.   Y. 

Snpp.  40),  381. 
Furman  v.  Nichdl  (8  Wall.  44),  54. 


800 


TABLE  OF  CASES  CITED. 


References  are  to  Pages. 

Goddard,  In  re  (16  Pickering,  504), 
G.  457. 

Goldsbury  v.  Warwick  (112  Mass. 

384),  307. 
Goodrich  v  Detroit  (184  U  S.  432) » 

459,  471,  472,  474,  475. 
Gordon   v.   Appeals  Tax  Court  (3 

How.  133),  47,  83. 
Grand  Lodge  v.  Now  Orlf-ans  (166 

U.  S.  143),  50,84. 
Grether  v.  Wright  (23  C.  C.  A.  498), 

16,718. 
Gridley  v.  Bloomington  (88  111.  554), 

457. 
Gulf,  Colo.  &  Santa  Fe  R.  R.  Co.  v. 

Ellis  (165  U.S.  154),  b36. 
Gulf  &    Ship  Islatul  R.  R.    Co.  v. 

Hewes  (183  U.  S.66),  66. 
Gundling  v.  Chicago  (177  U.  S.  183), 

527,601. 
Guy  V.  Baltimore  (100  U.  S.  434), 

219. 


Gallup  V.  Schmidt  (183  U.  S.  300), 

393. 
Garland  ».  Gaines   (73  Conn.  6G2), 

671. 
Garrison  v.  City  of  New  York   (21 

Wall.  196),  82. 
Gatch  V.  Des  Moines  (63  Iowa,  718) , 

379. 
GeekieiJ.  Kirby  Carpenter  Co.  (106 

U.  S.  379),  730. 
Gellsthorpe  v.  Fernel)    (20    Mont. 

209),  582. 
Gelpke  w.  Dubuque   (1  Wall.  175), 

732. 
Geneseo    v.   Geneseo    County    (55 

Kans.  358),  422. 
Georgia  v.  Atkins  (1  Abbott  (U.  S.) 

22),  670. 
Georgia  Pkg.  Co.  v.  Macon  (60  Fed. 

Rep.  774),  144. 
Germania  Trust  Co.  v.  San  Fran- 
ci.sco  (128  Cal.  589),  545. 
Gibbons  v.  District  of    Columbia 
(116  U.  S.  404),  688. 
V.  Ogden  (9  Wheatoa,  1),-  101, 
636. 
Gibson  County  v.  Pullman  Southern 
Car    Co.    (42  Fed.   Rep. 
572),  238. 
Gillette  v.  City  of  Denver  (21  Fed. 

Rep.  822),  460. 
Gilraan  v.  Sheboygan(2  Black,  510), 

599. 
Glozzav.  Tiernan  (148   U.  S.  657), 

601. 
Givanv.  Wright  (117  U.  S.  648),  45. 
Glasgow  V.  Rowse  (43  Mo.  479),  563. 
Gleason    v.    Waukesha     Co.     (103 

Wise.  225),  480. 
Gloucester  Ferry  Co.  v.  Pennsyl- 
vania  (114    U.   S.   196), 
211. 


H. 

Hadley  v.  Dague    (130  Cal.  207), 

480. 

Haffla  V.  Mason  (15  Wall.  671),  737. 

Hagar  v.  Reclamation  District  (111 

U.  S.  701),  376,382,  443, 

459,  466,  467. 

Hagner  v.  Hall  (10   App.  Div.  (N. 

Y.)  581),  397. 
Hagood  V.  Southern  (117  U.  S.  52), 

721. 
Haightu.  Railroad  Co.  (6  Wall.  17), 

670. 
Hamilton  Company  ■;;.    Massachu- 
setts (6  Wall.  632),  19. 
Hammett  v.  Philadelphia  (65  Pa. 

146), 457. 
Hanford  v.  Davies  (163  U.  S.  273), 

698. 
Hannewinkle  v.    Georgetown     (15 
Wall.  548),  710. 


TABLE  OF  CASES  CITED. 


801 


References 

Hans  V.   Louisiana   (134  U.  S.  1), 

719. 
Hardin  v.  Honeback  (137  U.  S.  43), 

737- 
Harman   v    City   of  Chicago    (147 

U   S.  396),  204,  205. 
Harrisburg  v.  McPherran  (200   Pa. 

343),  480. 
Hartraan   u    Greenhow   (102  U.  S. 

672),  56,73. 
Hawes  v.  Oak  aud  (104  U.  S.  450), 

713,  733. 
Hawkens  v.  Magum  (78  Miss.  97), 

59'.>. 
Hayes  v.  C  'mmonwealth  (55  S.  W. 

R>  p.  425),  601. 
Hays  y  Pacif  c  M  lil  Steamship  Co. 

(17  How   596),  198. 
Hazzard  v.  O'Bannon  (36  Fed.  Rep. 

854;  38   Ftd.   Rep.  220), 

716. 
Head  Money  Cases  (112  U.  S.  595), 

134,  610,  646,  654,  667. 
Heine  v.  Levee  Commissioners  (19 

Wall.  655),  727. 
Heman  v.  King  (So  Mo.  App.  231), 

711. 
V.  Schulte  (166  Mo.  409),  493. 
Henderson  v.  Mayor  (92  U.  S.  269), 

133. 
Henderson  Bridge  Co.  v.  Hender- 
son (173  U.  S.  592),  212. 
«.  Kenluciiy  (166    U.  S.    150), 

212,302. 
Hennick,    In  re    (5  Mackey,  589), 

151. 
Hepburn  v.  Scliool  Directors  (23 

Wall.  480),  308,  315. 
Hersey  v.   Supervisors   (16  Wise. 

185),  613. 
Hershlre  v.  First  National  Bank 

(36  Iowa,  272),  304. 
Heth  V.  Radford  (96  Va.  272),  380^ 

466. 
61 


are  to  Pages. 

Hill  V.  Railroad  Co.  (41  Fed.  Rep. 

610),  86. 
Hills  V.  Exciiange  Bank  (105  U.  S. 

319),  324,  711. 
Hinson  v.  Lott  (8  Wall.  148),  168. 
Iloge    V.    Railroad  Co.   (99  U.   S. 

348),  86. 
Holden  v.  Hardy  (169  U.  S.  389), 

3t;5. 

Holmes  v.  Oregon  &  California  Ry. 

Co.    (5  Fed.    Rep.  523), 

531. 
Home  of  the  Friendless  v.  Rowse 

(8  Wall.  430),  50. 
Home  Insurance    Co.   v.  Augusta 

(93  U.  S.  116),  83. 
V.   New  York    (92  N.   Y.  328; 

11.9  U.  S.  129),  20,  182. 
V.  New  York  (134  U.  S.  694), 

573. 
V.  Swigert  (104  111.  653),  177. 
V.  Tennessee  (161  U,  S.  198), 

88. 
Hondayer's  Estate  (150  N.  Y.  37; 

34  L.  R.  A.  235),  549. 
Hooper  v.    California   (155  U.   S. 

648),  157. 
Hopkins  v.  Baker  Bros.  &  Co.  (78 

Md.   363;    22   L.    R.    A. 

477), 525. 
Horn  V.  Green  (52  Miss.  452),  15. 
Horn  Silver  Mining    Co.   v.   New 

York    (143  U.    S.    305), 

179. 
Horner  V.  United  States  (143  U.  S. 

570),  696. 
Hough,  Ex    parte   (69  Fed.    Uep. 

330),  152. 
Houston,  In  re  (47  Fed.  Rep.  539), 

165. 
Humes  v.   Ft.  Smith  (93  Fed.  Rep, 

857),  602. 
Humphrey  v.    Pegues    (16    Wall. 

244),  68,  88. 


802 


TABLE  OF  CASES  CITED. 


References 

Hunnewell    v.    Cass    County    (22 

Wall.   464),  26. 
Huntington  v.    Mahaa    (142    Ind. 

695),  157,  165. 
V.  Palmer  (7  Sawyer,  355),  716. 
V.    Worthen    (120  U.    S.   97), 

555,  692,  706. 
Hurtada  v.  California  (110  U.  S. 

516,  535),  405,  411. 
Huse  V.  Glover  (119  U.  S.  543),  4, 

204,  207,  214,  219. 
Hutcheson    v.    Storrie    (92    Tex. 

685;  45   L.    R.   A.  289), 

482. 
Huus  V.  Porto  Rico  Steamship  Co. 

(182  U.  S.  392),  221. 
Hylton  V.  United  States  (3  Dallas, 

171),  648. 
Hynes   v.    Briggs   (41  Fed.    Rep. 

468),  158. 

I. 

Illinois  Central  R.  R.  Co.  v.  Adams 

(180  U.  S.  28),  698,  726. 
V.  Decatur    (147     U.  S.    190), 

95,  433. 
Income  Tax  Cases  (157  U.  S.  429; 

158  U.    S.    601),  7,   649, 

713,  735,  738. 
Indiana  Railroad  Cases  (154  U.  S" 

426),   381,  382,  393,  571, 

572. 
Inman  Steamship  Co.    v.    Tinker 

(94  U.  S.  238),  216. 
Insular  Cases   (182   U.   S.   1,  222, 

244),  735. 
Insurance  Co.   v.   Morse  (20  Wall. 

445), 181. 
Iowa  V.  Wheelock  (95  Iowa,  577), 

167. 

J. 

Jefferson  Branch  Bank  v.  Skelly  (1 
Black,  436),  49,  65. 


are  to  Pages. 

Jefferson,  In  re  (35  Minn.  215), 
505. 

Jenkins  v.  NefE(186  U.  S.  230),  322. 

Johns  Hopkins  Hospital,  In  re  (56 
Md.  17),  454. 

Johnson    v.    De    Bary-Baya    Mer- 
chants' Line  (37  Fla.  499, 
37  L.  R.  A.  518),  202. 
y.  Duer  (115  Mo.  366),  493. 

Joseph  V.  Randolph  (71  Ala.  499), 
526. 

Juniata  Limestone  Co.  v.  Fagley 
(187  Pa.  St.  193;  42  L. 
R.  A.  442),  596. 

K. 

Kansas  City  v.  Bacon  (157  Mo.  450), 

434. 
V.  Building  &  Loan  Association 

(145  Mo.  50,  53),  553. 
V.  Grush  (151  Mo.  128),  600. 
V.  Whipple  (136  Mo.  475),  601. 
Kansas  Indians,  The  (5  Wall.  737), 

28. 
Keely  v.  Sanders   (99  U.  S.  441), 

648. 
Keith  V.   Alabama   (97  Ala.  32;  10 

L,  R.  A.  430),  120. 
0.  Clark  (97  U.  S.  454),  54. 
Kelley  v.   Rhoades    (Wyo.)   (39  L. 

R.  A.  594),  129. 
Kellogg  V.  Winnebago  County  (42 

Wise.  97),  531. 
Kelly  V.  Pittsburgh  (104  U.  S.  78), 

375,  414,  415,  440. 
Kentucky  Railroad  Case  (115  U.  S. 

331),  266,  270,  382,  387. 

569. 
Keokuk  &  Hamilton  Bridge  Co.  v. 

Illinois  (175  U.  S.  626), 

213. 


TABLE  OF  CASES  CITED. 


803 


References 

Keokuk  &  Northwestern  R.  R.  Co. 

V.   Missouri    (152  U.    S. 

301),  91. 
Kerr  v.  South  Park  Commissioners 

(117  U.  S.  379),  459,  464. 
Kinnell  v.    State    (104  Teun.  184), 

160. 
King   u.    Mullins  (171  U.  S.  404), 

869,  396. 
V.  Portlan.l   (184  U.  S.  61;   33 

Or.  402),    459,    475,  489, 

495. 
Kingman  v.  Broctcn  (153  Mass.  255; 

11  L.  R.  A.  123),  423. 
Kinsley   v.   CottrfU    (196   Pa.    St. 

614),  601. 
Kirtland  v.   Hotchkiss  (100  U..S. 

491),   502,  506,  513,  536, 

684,  685. 
Kissinger  v.  Bean  (7  Biss.  60),  734. 
Knowlton  v.  Monre  (178  U.  S.  41, 

645,    646,  649,   655,    671, 

672,  677,  681. 
Knoxville  &  Ohio  R  R.  Co.  v.  Har- 
ris (99Tenn.  684),  233. 
Kummel,  In  re  (il  Fed.  Rep.  775 j, 

152. 

L. 

Lackawanna  v.  National  Bank  (94 
Pa.  221),  :;42. 

Lafayette  Ins  Co.  v.  French  ( 1 8 
How.  451,  452),  173. 

Laloup  V.  Mobile  (127  U.  S.  640), 
210,  227. 

Lane  County  v.  Oregon  (7  Wall.  75) , 
42. 

Laurens   v.  Elmore  (55  S.  C.  477) 

157. 
League  v.  Texas  (184  U.  S.  156;  94 

Texas,  553),  397. 
Lee  tJ.  Sturgis  (46  Ohio,  153;  2  L.  R. 

A.  556),  539. 


are  to  Pages. 

Lehigh  Valley  R.  R.  Co.  v.  Pennsyl- 
vania   (145  U.    S.    192), 

250. 
Lebigh   Water  C  •.  v.  Easton  (121 

U.  S.  388,  392),  67. 
Leisyy.  Hardin  (135U.  S.  100),  110, 

122,  675,  680. 
Lentu.  Tilson  (140  U.  S.  316),  385, 

401,  459,  476,  475. 
Lewis  V.  Monson    (151  U.  S.  545), 

730. 
Lewis'   Estate,  In   re  (Penn.)    (52 

Atl.  Rep.  205),  549. 
Lewiston   Water  &  Power  Co.  v. 

Asotin  Co.  (24  Wash.  37), 

544,  716. 
License  Cases  (5  How.  504,   575"). 

107,  109, 114. 
License   Tax  Cases  (5  Wall.  462) 

525,  674,  681. 
Lightburne  v.  Taxing  District    (4 

Lea,  219),  205,  226. 
Lindsay  u.  Shreveport  Bank  (156  U. 

S.  485),  712. 
Linehan  Ry.  Trans.  Co.  v.  Pender- 

grass    (16  C.  C.  A.  585), 

697. 
Linton  v.  Childs  (105  Ga.  567),  301. 
Lionberger  V.  Rowse  (9  Wall.  468), 

239,  313. 
Litchfield    v.   County    of    Webster 

(101  U.  S.  773),  389. 
Little  V.  Bowers   (134   U.  S.  547), 

711. 
Little  Rock  &  Ft.  Smith  R.  R.  Co. 

V.  Worthen    (120    U.  S. 

97),  705. 
Liverpool  Insurance  Co.  v.  Massa- 
chusetts (10  Wall.  566), 

175. 
Loan    Association   v.   Topeka    (20 

Wall.  655),  406,  414,  561, 

673. 
Loan  &  Homestead  Association  v. 

Keith  (153  111.609),  552. 


804 


TABLE  OF  CASES  CITED. 


References  ar 

Lockwood    V.    St.   Louis   (24  Mo. 

?2),  434. 
Loeb  V.  Columbia  Township  Trus- 
tees (179  D.  S.472),  459, 
479,487,  696,  G99. 
Lombard  v.  Park  Commissioners, 

181  U.  S.  38),  459,  465. 
Loughborough u.  Blake  (5  Wheaton, 

317),  652,  687.      ■ 
Louisiana  v  Mayor  or  New  Orleans 
(109  U.  S.  285),  84. 
V.  Pilsbury  (105  U.  S.  278),  76, 
454. 
Louisiana  Co.  v.  New  Orleans  (31 

La.  Ann.  440),  552. 
Louisiana  ex  rel.  N.  Y.  Guaranty 
Co.  V.  Steele  (184  U.  S. 
230),  721. 
Louisiana    Liquidation     Commis- 
sioners   V.    Moreo    (106 
La.  130),  578. 
Louisville  &  Nashville  R.  R.  Co.  v. 
Palmes   (109  U.  S.  245), 
63,  89. 
Louisville  Water  Co.  v.  Clark  (143 

U.  S.  1),86. 
Low  V.  Austin  (13  Wall.  29),  124. 
Lowell  u.  Boston  (HI  Mass.  454), 

422. 
Lowell  V.   County  Commissioners 

(152  Mass.  375),  614. 
Lumberville  'Bridge   Co.  v.  State 
Board  of  Assessors  (55 
N.J.  L.  529),  214. 
Luther  V.  Borden  (7  How.  1),727. 
Lyon  V.  Tonawanda  (98  Fed.  Rep. 
361),  479. 

M. 

McBean  v.  Chandler  (9  Heisk.349), 

433,  454. 
McCall  V.    California    (136   U.   S. 

104),  229. 
McCormack  v.  Patchin  (53  Mo.  33), 

457. 


e  to  Pages. 

McCready  v.  Virginia    (94  U.    S. 

391)    206. 
McCuUoch  V.  Maryland  (4  Wheaton, 

316),  8,  297,638,  690.~ 
McCallough   V    Virginia    (90  Va. 

697;   172  U.  S.  102),  60. 
McCutchen  v.  Rice  County  (7  Fed. 

Rep.  558),  503,  533. 
McGahey  v.  Virginia    (133   U.   S. 

662),  61. 
McGee  v.  Mathis  (4  Wall.  43),  95. 
McHenry  v.  Downer   (116  Cal.  20; 

45  L.  R.  A.  737),  324. 
Mclver  v.  Robinson  (53  Ala.  456), 

317. 
McKeen  v.  County  of  Northampton 

(49  Pa.  St.  519),  539. 
McLeod  V.  Receveur  (71  Fed.  Rep. 

455),  381. 
McMahon   v.   Palmer    (102    N.    Y. 

176),  319. 
McMillen  v.  Anderson    (95   U.    S. 

37),  375,387. 
McNeil,  Ex  parte    (13  Wall.  236), 

221. 
Machine  Co.  v.  Gage   (100  U.    S. 

676),  162. 
Mackay  v.  San  Francisco  (113  Cal. 

392),  514. 
Macon  v.  First  National  Bank  (57 

N.  E.  Rep.  728),  342, 
Madera  Irrigation  District,  In   re 
(14L.  R.  A.  755;  92  Cal. 
296),  446. 
Mager  v.  Grima  (8  How.  490),  130. 
Magoun  v.  Ills.   Trust  &  Savings 
Bank  (170  U.  S.  283,  167 
111.  122),  583,  585. 
Maguire  v.  Board  of  Commission- 
ers (71  Ala.  401),  552. 
V.    Commonwealth     (3     Wall- 
387),  674. 
Mahoney's  Estate,  In  re  (133  Cal. 
180),  583. 


TABLE  OF  CASES  CITED. 


805 


References 

Maine  W.Grand  Trunk  R.    R.    Co. 

(142  U.  S.  217),  256,260, 

646. 
Mallett  V.  North  Carolina  (181   U. 

S.  589),  701. 
Manchester  v.   Massachusetts  (139 

U.  S.  240),  207. 
Manchester  Insurance   Co.  v.  Har- 
riott (91  Fed.  Rep.  711), 

573. 
Marbury    v.   Madison    (4   Cranch, 

110),  8. 
Maricopa  &  Phoenix  R.  R.   Co.   v. 

Arizona  (156  U.  S.  347), 

30. 
Markham  v.  Manning  (96  N.  C.  132), 

604. 
Markoi  v.  Hartrauft  (16  Am.  Law 

Reg  487),  306. 
Marshalltown    v.    Blum  (58  Iowa, 

184),  145. 
Martha    v.   Ottawa   (114  111.    59), 

422. 
Martin  v.  Hunter  (1  Wheaton,  304, 

326),  635. 
V.  Rosedale  (130  Ind.  108),  152. 
Marx   V.   Hanthorn    (-30  Fed.  Rep. 

579),  81. 
V.   Hanthorn    (148  U.  S.  172), 

398. 
Marye  v.   Baltimore   &   Ohio  R.  R. 

Co.  (127  U.  S.  117),  241. 
Massachusetts  v.  Western  U.  Tel. 

Co.  (141  U.  S.  40),  277. 
Mattingly  v.  District  of  Columbia 

(97  U.  S.    687),  459,  460, 

688. 
May    V.    New   Orleans   (178  U.  S. 

496),  119. 
May,  In  re  (82  Fed.  Rep.  422,  432), 

159. 

Maynard  v.  Hill   (126  U.  S.  205), 
411. 

Mayor  v.  Hussey  (67  Md.  112),  511. 


are  to  Pages. 

Mead  v.  Acton    (13£   Mass.   341), 

423. 
Mechanics  Bank  v.  Baker  (46  Atl. 

R.    586;    65  N.  J.  L.  113, 

549),  304. 
Memphis  v.  Bank  (6  Baxter,  415), 

342. 
V.  Ensley   (6  Baxter  (Tenn.), 

653),  545. 
Memphis  City  Bank  v.  Tennessee 

(101  U.  S.  186),  88. 
Memphis  Gas  Co.  v.  Shelby  County 

(109   U.  S.  398),  47,  68; 

72. 
Memphis  &  L.  R.  Co,  t?.  Dolan  (14 

Fed.  Rep.  532),  226. 
Memphis    R.    R.   Co.   v.  Commis- 
sioners (112  U.  S.  609), 

89. 
Mercantile  National  Bank  v.  Hub- 
bard (98   Fed.  R'p.  465; 

45  C.  C.  A.  66),  323,  383. 
V.  New  York  (121  U.  S.  156), 

99,  318,  320,322,  328. 
V.  Shields   (69  Fed.  Rep.  962), 

319. 
Merchants   Bank    v.    Pennsylvania 

(167  U.S.  461),  305,  382, 

580. 
Merchants  Life  Ass'n  v.  Yoakum, 

(98  Fed.  Rep.  251),  680, 
Merchants  &  Manufacturers  Bank 

V.  Pennsylvania   (167  U. 

S.  461),  313,  331,  344. 
Meriwether  v.  Garrett   (102  U.  S. 

472),  77. 
Merrills.  Humphrey  (24  Mich.  170), 

612. 
Metropolitan   Railroad  v.  District 

of  Columbia   (132   U.  S. 

1),  687. 
Meyer  v.  Muscatine  (1  Wall.  384), 

429. 
Michigan  Sugar  Co.  v.  Auditor-Gen- 
eral (124  Mich.  674),  422. 


806 


TABLE  OF  CASES  CITED. 


References 

Michigan  v.   Michigan  (185  U.  S. 

112),  700. 
Miller  v.  Goodman  (40  S.  W.  Rep, 

718),  165. 
V.  Merchants  National  Bank  (3 

National     Bank     Cases, 

711),  305. 
Minneapolis  v.  Beckwith  (129  U.  S. 

26),  356. 
Minneapolis  Brewing  Co.  v,  McGil- 

livray     (104    Fed.    Rep. 

258),  168,  712. 
Minotu.  Wiathrop  (162  Mass.  113), 

582. 
Mississippi  Mills  v.  Cook  (56  Mass. 

40),  552. 
Missouri  v.  Welton  (55  Mo.  288), 

142. 
Missouri  Coal  &  Mining  Co.  v.  Ladd 

(160  Mo.  435),  187 
Missouri,   Kansas  &  Texas  R.  R. 

Co  V.  Elliott  ri84  U.  S. 

530),  701,  702. 
Missouri  Pacific  R.  R    Co.  v.  Ne- 

braska  (164  U.  S.   403), 

411,428. 
Mitchell  V.  Board  of  Commission- 
ers (91  U.  S.  206),  41. 
U.Clark  (110  U.  S.  643),  671. 
V.  United  States  (21  Wall.  250), 

532. 
Mobile  V.  Dargan    (45  Ala.   310), 

454. 
V.  Kimball  (102  U.  S.  691),  438, 

459. 
Mobile  &  Ohio  R.  R.  Co.  v.  Ten- 
nessee   (153   U.    S.   486, 

506),  62,  70,  560. 
Modesto     Irrigation     District     v. 

Tragea    (88     Cal.    334), 

446. 
Montgomery  County  Com.  v.  Els- 
ton  (32Ind.  27),  15. 


are  to  Pages. 

Monticello  Distilling  Co.  v.  Balti- 
more (90  Md.  417),  380., 

Moore  v.   Halliday  (4  Dillon,    52) 
709. 
V.  Ruckgaber  (184  U.  S.  593), 
684. 

Moran  v.   New  Orleans  (112  If.  S. 
69),  202,  205, 

Morgan  v.  Beloit  (7  Wall.  613),  77. 
V.  Commonwealth  (98  Va.812), 

206. 
V.  Louisiana  (93  U.  S.  222),  89. 
V.  Parham  (16  Wall.  477),  199. 
V.  Town  Clerk  (7  Wall.  610), 

77. 
Morgan  Steamship  Co.  v.  Board  of 

Health    (99  U.    S,   273), 

216. 
V.  Louisiana   (118    U.  S.  455), 

220. 
Morgmeyeru.  Idler  (159  U   S.  408), 

698. 
Mormon  Church  v.   United  States 

(136  U.  S.  1),685. 
Morrison  v.  Moray  (146  Mo.  543), 

433. 
Mountain  View  Mining  &  Milling 

Co.  V.  McFadden  (180  U. 

S.  533),  70O. 
Mugleru.  Kansas  (123  U.  S.  623), 

527. 
Murdocku.  Ward  (178  U.  S.  139), 

671. 
Murray  v.   Charleston    (96    U.    8. 

440),  68,  74,  510,  511. 
Murray,  Ex  parte  (93  Ala.  78),  161. 
Murray  v.  Hoboken  Land  Co.  (18 

How.  272),  374,  690. 
Myers  v.  Baltimore  County  Com- 
missioners (83  Md.  385), 

126. 


TABLE  OF  CASES  CITED. 


807 


References  are  to  Pages. 


N. 


Nathan  V.  Louisiana  (8  How.  73), 

131. 
National   Bank  v.    Commonwealth 

(9   Wall.  353),  304,   330, 

343. 
V.    Kimball   (103   U.   S.   732), 

335,  625,  715. 
V.  New  York  (64   N.  E.    75G), 

633. 
V.  United  States  (101  U.  S.  1), 

673. 
National  Bank  of  BilMmore  v.  Bil- 

timoreC92Fed.Rep.  239; 

100  Fed.  Kep.  241),  319, 

338. 
National  Bank  of  Camden  v.  Pierce 

(2  National  Bank  Cases, 

177),  307. 
National     Bank     of    Chattanooga 

V.    Mayor      (8    Heiskell 

(Tenn.),  814),  301. 
National  Bank  of  Chemung  v.  El- 

mira  (53  N.  Y.  49),  305. 
National  Bank  of  Comnaerce  v.  New 

Bedford  (155  Mass.  313), 

307. 
V.  Seattle  (166  U.  S.  463),  320, 

328. 
National  Bank  of  Garnett  v.  Ayers 

(160  U.  S.  660),  320. 
National   Bank  of    Wellington    v. 

Chapman  (173  U.S.  205), 

326. 
National  Dredging  Co.  v.  State  (99 

Ala.  462),  201. 
National  State  Bank  v.  Young  (25 

Iowa,  311),  301. 
Neenan  v.  Smith  (50  Mo.  525),  443. 
Neil  V.  Ohio  (3  How.  720,  11  L.  C. 

P.  537),  18. 
Neilson  v.  Garza  (2  Woods,  287), 
135. 


Nelson  Lumber  Co.  v.   McKinnon 
(61  Minn.  219),  388. 
V.  Town  of  Lorraine  (22  Fed. 
Rep.  54),  128. 
Newark    Banking  Co.    v.    Newark 

(121  U.  S.  163),  323. 
Newby  v.  Bruwnlee  (23  Fed.  Rep. 
320),  24. 
V.  Platte  County  (25  Mo.   1.  c. 
.   269),  433. 
New  Hampshire  v.  Louisiana  (108 

U.  S.  76),  720. 
New  Haven  v.  City  Bank  (31  Conn. 

106),  342. 
New  Jersey  v.  Wilson   (7  Cranch, 
164),  45. 
V.  Yard  (95  U.  S.  104),  81. 
New  Orleans  v.  Citizens'  Bank  (167 
U.  S.  371),  93. 
V.  Eclipse  TowboatCo.  (33  La. 

Ann.  647),  205. 
V.  New  Orleans  Water  Co.  (142 

U.  S.  79),  441. 
V.  Stempel  (175  U.  S.309)  ,  502, 
504,  507. 
New  Orleans  &c.  Co.  v.  Louisiana 
(125  U.  S.  18),  68. 
V.  New  OnJeans  (143  U.  S.  192), 
48,  83. 
Newport  V.  Mudgett  (18Wash.271), 

328. 
Newport  v.  Taylor  (16  B.  Monroe, 

699),  205. 
Newton  v.  Commissioners    (lOO  U. 

S.  548).  84. 
New  York  v.  Barker  (179  U.  S.  279), 
332,  572. 
V.   Louisiana    (108  U.    S.  76), 

720. 
V.  McLean  (57  App.  Div.  601), 

.  344,  508. 
V.  Miln  (11   Peters,    102),  109, 

133. 
V.  Roberts  (171  U.  S.  664),  183, 
184. 


808 


TABLE  OF  CASES  CITED. 


llefereuces  ar 

New  York  Guaranty  Co.t?  Memphis 

Water   Co.     (107    U.  S. 

205,  2U),  709. 
New  York   Indiaos,  The    (5  Wall. 

761),  28. 
New  York,  Lake   Erie   &  W.  R   R. 

Co.  y.  Pennsylvania  (158 

U.  S.  431"),  260. 
New  York  Life  Ins.  Co.  v.  Cravens 

(178  U.  S   389),  157. 
v.Prest  (71  Fed.  Rep.  815),  456. 
New  York  &  Nt^w  England  R.  R.  Co. 

W.Bristol  (151  U.  S.5o6), 

86. 
•Nicol  V.  Ames  (173  U.  S.  509),   2, 

646,  650,  655,  678,  690. 
Nichols,  In  re  (48  Fed.  Rep.  164), 

152,  159. 
V.  N.    H.  &N.    Co.    (42   Conn. 

103),  342. 
Norfolk  &  Western  R.    R.   Co.   v. 

Pennsylvania  (136  U.  S. 

114),  230. 
North  Carolina  v.  Moore  (113  No. 

Car.   697;    22   L.    R.    A. 

472),  600. 
North  Dakota  v.  Nelson  County  (1 

No.  Dak,  88),  418. 
Northern  Pacific  R.  R.  Co.  v.  Dimes 

(2  No.  Dak.  310),  590. 
V.  Clark  (153  U.  S.  252,   272), 

715. 
V.  Garland  (5  Mont.  126),  590. 
V.  Myers  (172  U.  S.  589),  27. 
V.   Traill  County    (115   U.    S. 

600),  26. 
V.  Walker  (47  Fed.  Rep.  681), 

28,  589,  594. 
V.  Wright  (4  C.  C.  A.  193),  28. 
North  Missouri  R.  R.  Co.*  v.  Ma- 

guire    (20  Wall,  86),  62. 
Northwestern  Lumber  Co.  v.  Che- 

halis    County    (Wash.), 

(54  L.R.  A.  212),  201. 


e  to  Pages. 

Norton  V.  Shelby  County  (118  U. 

S.  442),  735. 
Norwood  V.  Baker  (172  U.  S.  269), 

459,   466,   476,   482,    484, 

485,  716. 

0. 

Ogden   V.  City   of  St.   Joseph  (90 

Mo.  522),  539. 
Ogden  City   v.  Armstrong  (168  U. 

S.  224),  697. 
Ogilvie  V.  Crawford  County  (7  Fed. 

Rep.  745), 125. 
Ohio  V.  Jones  (21  Ohio,  492),  285. 
Ohio  Life  Ins.  &  Trust  Co.  v.  De- 
bolt  (16  How.  416),  48. 
Olcott  V.    Supervisors    (16    Wall. 

678),  731. 
O'Neil  V.  Vermont  (144  U.  S.  361), 

352. 
Opinion  of  the  Justices  (150  Mass. 

592;  8  L.R.  A.  487),  424. 
(155   Mass.    598;    15   L.   R.  A. 

809),  426. 
Orcutt's  Appeal  (97  Pa.  179),  549. 
Oregon  &  California  R.  R.  Co.  v. 

Portland  (25  Or.  229;  22 

L.  R.  A.  713),  491. 
Orr  V.  Gilman  (183  U.  S.  278),  78. 
Osborn     v.    Bank    of    the    United 

States  (9  Wheaton,  738), 

12,  297,  723,  740. 
Osborne  v.  Adams  County  (106  U. 

S.  181;  109  U.  S.  1),  410, 

411. 
V.  Florida  (164  U.  S.  650),  232. 
V.  Mobile  (16  Wall.  479),  210, 

225,  227. 
Oskamp  v.  Lewis  (103  Fed.  Rep. 

906),  387. 
Ouachita  Packet  Co.  v.  Aiken  (121 

U.  S.  444),  219. 
Overton    v.    Vicksburg   (70    Miss. 

558),  152. 


TABLE  OF  CASES  CITED. 


809 


References 

Owensboro     National     Bank     v. 

Owensboro    (173    U.    S. 

664),  297,  300,  302. 
Oxley  Stave  Co.  v.  Butler  County 

(166  U.  S.  649),  700. 

P. 

Pabst  Brewing:;  C  >.  v.  Terre  Haute 

C98  Frd.  R(,'p.  230),  168. 
Pace  V.  Burgess  (92  U.  S.  272),  663, 
Pacific  Express  Co.  v.  Seibert  (142 

U.  S.  339),  231,283. 
Pacific  lus.  Co,  V.  Soule    (7  Wall. 

433),  646. 
Pacific  National  Bank  of  Tacoina  v. 

Pierce  County  (20  Wash. 

675),  309. 
Pacific   Postal    Tel.    Cable    Co.  v- 

Daltou    (119    Cal.    G04), 

613. 
Pacific    Railroad    Co.    v.   Maguire 

(20  Wall.  36),  62. 
Packet    Co.    v.    Catlettsburg    (105 

U.  S.  559),  217. 
V.  Keokuk  (95  U.  S.  80),  217. 
V.  St.  Louis    (100  U.   S.   433), 

217. 
Palmer  v.  McMahon  (133  U.  S.  660), 

344,  379,  382,  388. 
V.  Ray   (6  Colo.  106),  433,  454. 
Paquete   Habana,  The    (175   U.    S. 

677),  696. 
Parker  v.  D;  troit   (103   Fed.  Rep. 

357),  479. 
Parkersburg  v.  Brown    (106  U.  S. 

487),  410. 
Parsons    v.  District    of    Columbia 

(170  U.  S.  45),  459,463. 
Passenger  Cases  (7  Howard,  283), 

109,  133. 
Patterson  v.   Kentucky   (97  U.  S. 

501), 36. 
Fatten  V.  Brady    (184   U.    S.    608, 

619),  646,  682. 


are  (o  Pages. 

Paul  V.  Detroit  (32  Mich,  108),  471. 
V.  Virginia  (8  Wall,   183),  157, 
174. 
Paulsen  v.  Portland  (149  U.  S.  30), 

384,  433,  459,  460,  467, 
Peay  v.  Little  Rock    (32   Ark.  31), 

454. 
Peck  V.  Miami  County    (4   Dillon, 

371),  29. 
Peete  r,    Morgan    (19   Wall.    581), 

216. 
Peltou  V.  National  Bank  (101  U.  S. 

143),  332. 
Pembina  Mining  Co.   v.   Pennsyl- 
vania  (125    U.    S.   181), 
177,356. 
Pennock  v.  Commissioners  (103  U. 

S,  44),  29. 
Pennoyer  V.   McConnaughy  (140  U. 
S.  1),  721. 
V.  Neff  (95  U.S.  714),  509. 
Pennsjlvania  v.    Pullman     Palace 
Car  Co.   (107  Pa.    156), 
242. 
Pensacola  Tel.     Co.   v.    West' rn 
Union  Tel.  Co.  (96  U.  S. 
1),227. 
People  V.  American   Bell  Tel.   Co. 
(117  N.  Y.  241),  188,  189. 
V.  Assessors  (156  N.  Y,  517;  42 

L.  R.  A,  290),  36. 
V.  Bunker  (87  N.  W.  Rep.  90), 

152. 
V.  Coleman  (119  N.  Y.  137;  135 

N.  Y,  231),  522-,  544. 
V.    Commissioners    (76   N.  Y. 

77),  72,  124. 
V.   Commissioners  (104   U.  S. 

466), 133. 
V.  Compagnie  Gen.   Trans-At- 
lantique    (107  U,  S.  69), 
134. 
V.  Dolan  (36  N,  Y.  59),  324, 
V.  Fire   Association    (92  N.  Y. 
311),  177,  186. 


810 


TABLE  OF  CASES  CITED. 


References 

People  V.  Harkness  (44  N.  Y.  Supp, 
46),  86. 

V.  Home  Ins.  Co.  (29  Cal.  533), 

73,  87, 
V.  Keith  (153  111.    609),  553. 
V.  Kniffht  (3  N.  Y.  Supp.  745), 

36. 
V.  Mining  Co.  (105  N.  Y.  76), 

191. 
V  National  Bank  (123  Cal,  53), 

301. 
V.  Roberts  (159  N.  Y.  70;  45  L. 

R.  A.  267),  36. 
V.  Salem    (20  Mich.  452),  416, 

420,  427. 
V.  Smith  (123  Cal.  70),  737. 
V.    Trust  Company    (96  N.  Y. 

387),  191. 
-     V.  Trustees  (48  N.  Y.  390),  505. 
V.  Walling  (53  Mich.  264),  168. 
V.  Weaver  (100  U.  S.  539),  824, 

331. 
People's  National  Bank  v.    Marye 

(107  Fecl.Rf'p.  570),  328, 

343,379,  711,  712. 
People  ex  rel.  v.  Badlara  (57  Cal. 

594),  544. 
V.  Barker  (146  N.  Y.  304),  616. 
V.  Campbell  (188  N.  Y.  543;  20 

L.  R.  A.  458),  521. 
V.   Coleman  (lSi6    N.    Y.  433), 

294. 
V.    Gallagher   (93  N.   Y.    438), 

604. 
V.  Ryan  (88  N.  Y.  142),  324. 
V.  Tax  Commissioners   (69  N. 

Y.  91),  342. 

People  ex  rel.  Griff  v.  Brooklyn  (4 
N.  Y.  419),433. 

People  ex  rel.  Hoyt  v.  Commis- 
sioners of  Texas  (23  N. 
Y. 224), 535. 

People  ex  rel.  Jefferson  v.  Smith 
(88  N.  Y.  576),  505. 


are  to  Pages. 

People  ex  rel.    Mills  v.   Commis- 
sioners of  N.  Y.    (23  N. 

Y.  242),  159. 
People  ex  rel.  Southern  Hotel  Co. 

V.   Wemple    (131    N.   Y. 

64), 191. 
Pergus  V.  Ray  (23  So.   Rep.   904), 

157. 
Pervear  v.  Commonwealth  (5  Wall. 

475),  674. 
Petapsco  Guano  Co.  v.  North  Car. 

Bd.  of  Agriculture  (171 

U.  S.  345),  134. 
Philadelphia  v,  Atlantic  &  Pac.  Tel. 

Co.  (42  CCA.  325),  239. 
V.  Collector  (5  Wall.  720),  735. 
V.  Postal  Tel.  Cable  Co.  (21  N. 

Y.  Supp.  556),  239. 
V.  Western  Union  Tel.  Co.  (82 

Fed.  Rep.    797;    89  Fed. 

Rep.  454),  2.39. 
Philadelphia  Fire  Ass'tt-y. New  York 

(119  U.  S.  110),  176,  181, 

185,673. 
Philadelphia  Steamship  Co.  v.  Penn- 
sylvania (122  U.  S.  326), 

250,  2£2,  256,  259. 
Philadelphia  &   Wilmington  R.  R. 

Co.  V.  Maryland  (10  How. 

376),  48. 
Phillips   V.   Payne    (92   U.  S.  130), 

727. 
Phoenix  Insurance  Co.  v.  Tennessee 

(161  U.  S.  174),  68. 
V.  Welch  (29  Kansas,  672),  177. 
Picard  V.Tennessee,  etc.,  R.  R.  Co. 

(130  U.  S.  637),  89. 
Pickard  v.  Pullman   Southern  Car 

Co.  (117   U.  S.  34),  238, 

240. 
Piqua  Branch  Bank  v.  Knoop  (16 

How.  387),  47,  48. 
Pitts  V.  Clay  (27  Fed.  Rep.  635),  26. 
Pittsburgh  Co.  v.  Bates  (156  U.  S. 

577), 115, 117,  680. 


TABLE  OF  CASES  CITED. 


811 


References  ai 

Pittsburgh,  etc.,  R.  R.  Co  v.  Backus 

(154  U.  S.  421),  271,  292, 

294. 
V.  Board  of  Public  Works,  (172 

U.  S.  32),  214, 710. 
V.  Slate   (4D   Ohio   St.  189;    16 

L.R.  A.  380),  564. 
Planters'  Insurance  Co.  v.  Tennes- 
see (161  U.  S.  193),  88. 
Plumley  v.  Massachusetts  (155  U. 

S.  461),  675. 
Pluramer  v.  Coler  (178  U.  S.  115), 

38. 
Pollard  V.  The  State  (65  Ala.  628), 

317. 
Pollock  V.  Farmers   Loan  &  Trust 

Co.  (157  U.  S.    429;   158 

U.   S.  601),  649,  668,  67?, 

681,  713. 
Port  Clinton  Borough  v.  Shafer  (5 

Pa.  Dist.  Ct.  583),  145. 
Porter  v.  Railroad  Co.  (76  111.  561), 

266. 
Postal    Telegraph     Cable     Co.    v. 

Adams   (155  U.  S.   688), 

235,  303. 
t;.  Charleston  (153  U.  S.  692), 

231. 
V.  Richmond  (99  Va.  102),  234. 
Preston  v.  Finley  (C.  C.)  (72  Fed. 

Rep.  850),  169. 
V.  Roberts  (12  Bush,  57),  464. 
Prevost  V.   Grenaux  (19   How.  1)^ 

39. 
Price  V.  Hunter  (34  Fed.  Rep.  355), 

522. 
Primm   v.  Fort  (23  Tex.  Civ.  App. 

605),  329. 
Providence     Bank    v.     Billings    (4 

Peters,  514),  46,  47. 
Provident  Institution  v.  Jersey  City 

(113  U.  S.  606),  463. 
V.  Massachusetts  (6  Wall.  611), 

19. 


•e  to  Pages. 

Provident  Institution  for  Savings 
V.    Boston     (101     Mass. 
575),  313. 
Pullman's  Pa'ace  Car  Co.  v.  Hay- 
ward  (141  U.S   36),  246. 

V.  Pennsylvania  (141  U.  S.  18), 
242. 

V.  Transportation  Co.  (171  U.  S. 
138),  268,  293. 

V.    Twombley    (29    Fed.    Rep. 
658),  246. 
Pullman  Southern  Car  Co.  v.  Gaines 
(3Tenn.Ch.  587),238. 

V.   Nolan    (22   Fed.    Rep.  276), 
238. 

Q. 

Quincy  v.  Jackson  (113  U.  S.  337), 

728. 


R. 

Racine    Iron    Co.    v.  McCommons 

(111  Ga.  536),  165. 
Radebaugh  v.  Village  of  Plain  City 
(28    Weekly    Law    Bui. 
107),  141. 
Rahrer,  In  re  (140  U.  S.  545),  HI. 
Railroad  Co.  w.  Board  of  Equaliza- 
tion (60  Cal.  35),  368. 
V.  Bristol  (151  U.  S.  556),  86. 
V.  Collector  ( 100  U.  S.  595),  683. 
V.  Ellis  (165   U.    S.  150),   577, 

850. 
V.  Gaines  (97  U.  S.  697),  87. 
V.  Hamblin  (102  U.  S.  273),  89. 
V.  Jackson    (7  Wall.  262),  510, 

670,  683. 
V.  Loftin  (105  U.  S.  258),  86. 
V.  McClure  (10  Wall.  511),  732. 
V.  Maine  (96  U.  S.  499),  86. 
V.  Maryland    (21    Wall.    456), 

240. 
V.  Mississippi  (102  U.  S.  135), 
700, 


812 


TABLE  OF  CASES  CITED. 


References  are  to  Pages. 


Railroad  v.  Peniston   (18  Wall.   5), 

31. 
V.  Richmond    (96   U.   S.    529), 

356. 
Railroad  &  Telegraph  Companies  v. 

State  Board   of    Equal- 
izers   of   Tennessee  (85 

Fed.  Rep.  802),  268. 
RailwayCo.w.  Ohle(117U.  S.  123), 

533. 
V.  McShane  (22  Wall.  444),  26. 
V,  Prescott  (16  Wall.  603),  23, 

24. 
Ralls  County  v.  United  States  (105 

U.  S.  736),  76,  728. 
Ralph  V.  Fargo  (7  N.  Dak.   640), 

456.      ■ 
Ramish  v.  Hartwell  (126  Cal.  443), 

399, 475. 
Ramsey  County  v.  Robt.  P.  Lewis 

Co.  (Minn.),  (53  L.  R.  A. 

421),  480,  482. 
Randell  v.  City  of  Bridgeport  (63 

Conn.  321),  618. 
Ratterman  v.  Western  Union  Tel. 

Co.  (127  U.  S.  411),  255. 
Reagan  v.  Farmers  Loan  &  Trust 

Co.  (154  U.  S.  362),  721. 
Rector  &c.  v.  County  of  Philadelphia 

(24  How.  .300),  53,84. 
Rees  V.  Watertown  (19  Wall.  107), 

727. 
Reinken  v.  Fuehring  (130  Ind.  382), 

457. 
Reymann  Brewing  Co.  v.   Brister 

(179  U.  S.  445),  160. 
Rhodes  r?.  Iowa  (170 U.  S.  412),  112, 

122,  129. 
Richards  v.  Raymond  (92  111.  612), 

420. 
V.   Town  of  Rock  Rapids  (31 

Fed.  Rep.  505),  329,  336. 
Riley  V.  Western   Union  Tel.  Co. 

(47  Ind.  511),  552. 


Robbins  v.  Shelby  County  Taxing 

District  (120  U.  S.  489), 

146. 
Robertson    v.    Commonwealth     of 

Kentucky   (19   Ky.   Law 

Rep.  442), 205. 
V.  Sewell  (31  C.  C.  A.  107),  24. 
Rogers  v.  Kent  County  Judge  (115 

Mich.  441),  141. 
Rosenblatt,  Ex  parte  (19  Nev.  439), 

152. 
Rosenblatt  v.  Johnston  (104   U.  S. 

462),  301. 
Royall  V.  Virginia  (116  U.  S.  572), 

58. 
Rozelle,  In  re  (57  Fed.  Rep.  156), 

151. 
Ruflau  V.  Bank  of  Commerce  (69  N. 

C.  498),  15. 
Russell  V.  Croy  (164  Mo.  69),  368, 

593,  705. 
Rutland  R.  R.  Co.  v.  Central  Ver- 
mont R.  R.  Co.  (159  U. 

S.  630),  702,  707. 

S. 

St.    Albans  v.   Cent.   Co.   (57  Vt. 

68),  515. 
St.  Clair  County  v.  Interstate  Car 

Transfer  Co,    (109  Fed, 

Rep. 741),  210. 
St.  Louis  V.  Coal  Co.  (158  Mo,  342), 

205. 
V.  Consolidated  Coal  Co.   (113 

Mo.  83),  600. 
V.  Ranken  (96  Mo.  497),  466. 
V.  Spiegel  (75  Mo,  145;  90  Mo. 

587),  600. 
V.   Wenaeker     (145  Mo.  230), 

554. 
V.  Western  Union  Tel.  Co,  (148 

U.  S.  92),  238. 
V.  Wiggins  Ferry  Co.  (11  Wall. 

423),  200, 


TABLE  OF  CASES  CITED. 


813 


References 

St.  Louis  &c.    R.  R.   Co.  v.  Berry 

(113  U.  S.  465),  91. 
Salt  Co.  V.  East  Saginaw  (13  Wall. 

373),  83. 
Salt  Lake  City  v.  Hollister  (118  U. 

S.  25(5,2G2),  C76. 
Sands  v.  Edmunds  (116  U.  S.  585), 

68. 
V.  Manistee   River    Inapt.  Co. 

(123  U.  S.  288),  204,208, 

219. 
San  Francisco  u.   Bank    (92  Fed. 

Rep. 273), 301. 
V.  Mackay  (21  Fed.  Rep.  539; 

22  Fed.  Rep.   602),    616, 

617. 
San  Joaquin  v.  Kings  River  Co.  v. 

Stanislaus  Co.  (118  Fed. 

R.  930),  86. 
Sanborn  v.  Rice  County  (9   Minn. 

273),  430. 
Sanford  v.  Foe  (37  U.  S.  App.  378; 

69  Fed.  Rep.  546),  285. 
San  Mateo  County  v.  So.  Pac.  R.  R. 

Co.  (13  Fed.  R.  145;  118 

U.  S.  394),  359,  593, '622. 
Santa  Clara  County  v.  So.  Pac.  R. 

R.  Co.  (118  U.  S.  394;  18 

F.  R.  385),  356,  359,  376, 

379. 
Saranac    Land    &    Timber    Co.  v. 

Comptroller      ol      New 

York   (177    U.    S.    318), 

402. 
Savings    Society    v.     Multmoraah 

County    (169  U.  S.  421), 

71,  512,  693. 
Sawyer  v.  Dooley    (21  Nev.   390), 

388. 
Sayre  Borough  v.  Pliillips  (148  Pa. 

482),  141,  144. 
Schmidt  v.  Failey    (148  Ind.  150; 

37  L.  R.  A.  442),  523. 
SchoUenberger     v.     Pennsylvania 

(171  U.    S.   1),  118,  124. 


are  to  Pages* 

Schroder  v.  Overman   (Ohio),  (47 

L.  R.  A.  156),  482. 
Scobee  v.  Bean   (22  Ky.  Law  Rep. 

1076,    59    S.    W.     Rep. 

860),  303. 
Scotland  County  Court  ».  Hill  (140 

U.  S.  46),  728. 
Scott  V.  Toledo  (36  Fed.  Rep.  385; 

I  L.  R.  A.  688),  364,379, 
471. 

Scottish  Union  Ins.  Co.  v.  Herriott 
(109  Iowa,  G06),  175. 

Scranton  v.  Levers  (9  Pa.  Dist. 
176),  480. 

Searight  v.    Stokes  (3   How.  151; 

II  L.  C.  P.  537),  18. 
Sears   v.  Bosftju  (173  Mass.  71;  43 

L.   R.  A.    834),  456,  457, 

480. 
V.  Street  Commissioners  (173 

Mass.35C),  457,  493. 
Second  National    Bank    of   Titus- 

villev.  Caldwell  (13  Fed, 

Rep.  429),  301. 
Sedgwick  v.  Bank  (104  U.  S.  Ill), 

684. 
Seibert  v.  Lewis    (122  U.  S.  284), 

77,  722. 
Sentell  v.  Railroad  Co.  (166  U.  S.- 

698),  696. 
Seward  v.  City  of  Rising  Sun  (79 

Ind.  351),  539. 
Sharpless  u.  Mayor  of  Philadelphia 

(21    Pa.    St.    147)    429, 

554. 
Shelby  County  v.  Union  Bauk  (161 

U.  S.   149),  48,  63,  92. 
Sheley  v.  Detroit  (45  Mich.  431), 

455. 
Shelton  v.  Piatt   (139  U.    S.  591), 

710. 
Shepp  V.  Traction  Co.    (17  Mont- 
gomery   Law  Rep.    62), 

190. 


814 


TABLE  OF  CASES  CITED. 


References  are  to  Pages. 


Sheppard  v.  Johnson   (2   Humph- 
reys, 285),  365. 
Shields  v.  Ohio  (95  U.  S.  319),  86. 
Shoemaker  v.   United  States    (U7 

U.  S.  282),  459,  464,  688. 
Sholey  v.  Rew  (23  Wall.  331),  646, 

649. 
Shotwell  V.  Moore  (129  U.  S.  590), 

41,390. 
Shumate  u.Heman  (181  U.  S.  402), 

483. 
Siegfrieds.  Raymond  (190111.424), 

124. 
Simmons  Hardware  Co  v.  Maguire 

(37  La.  Ann.    848),    152. 
Simpson  V.  Hopiiins  (82  Md.  478), 

591. 
Sinclair  v.  State  (69  N.  C.  47),  141. 
Singer  Mfg.  Co.  v.  Wright  (97  Ga. 

114;   35  L.  R.  A.  497;  33 

Fed.   R.  121;   141  U.   S. 

696),  158,  601,  711. 
Sinnott    v.    Com.    of  Mobile   (22 

How.  227),  221. 
Sioux  City  R  R.  Co.   v.  Sioux  City 

(138  U.  S.  98),  82. 
Slaughter  House  Cases   (16  Wall. 

36),  349. 
Smith  V.    County    Commissioners 

(117  Ala.  196),  564. 
V.  Jackson  (Tenn.),  (54  S.  W. 

Rep.  981;    47   L.    R.   A. 

416),  158. 
V.  Maryland    (18  How.   268), 

207. 
V,  New  York  Life  Ins.  Co.  (41 

S.  W.  Rep.  684),  579. 
V.  Reeves   (178  U.  S. 436), 720. 
Smyth  V.  Ames  (169  U.  S.  466,  516), 

717. 
Snyder  v.  Marian  (109U.  S.  189), 

734. 
Society   for    Savings  v.    Coite   (6 

Wall.  594),  19. 


South  Bend  v.  Martin  (142 Ind.  31), 

158. 
South  Carolina  v.  Gaillard  (101  U. 

S.  433),  55. 
Southerland-Innes  Co.  v.  Village 

of   Evart    (30  C    C.    A. 

305),  429. 
Southern  Cotton  Oil  Co.  v.  Wemple 

(44  Fed.  Rep.  24),  191. 
Southern  B.  &  L.  Ass'n  v.  Norman 

(98  Ky. 294), 175. 
Southern   Insurance  Co.  v.  Estes 

(106  Tenn.  472;  52  L.  R. 

A. 915),  671. 
Southern  Pacific  R.  R.  Co.  v.  Cali- 
fornia   (118  U.  S.    109), 

699. 
Southern    Pacific     Railroad    Tax 

Cases  (13  Fed.  Rep.  722; 

18  F.  R.  385),  515. 
Southern  Railway  Co.  v.  AshevUle 

(69  Fed.  Rep.  359),  712. 
Southwestern  Ry.   Co.   v.   Wright 

(116  U.  S.  231),  86. 
Spain,   In  re  (47  Fed.   Rep.  208), 

157,  159. 
Speer  v.  Athens  (Geo.)   (9  L.  R.  A. 

402),  473. 
Spencer  v.   Merchant    (125   U.   S. 

345,  100  N.Y.  587),  456, 

459,  461,  465,  467. 
Spies  V.  Illinois    (123   U.  S.  131), 

353. 
Spoon  V.  Frambach  (83  Minn.  301), 

671. 
Sprague    v.  Fletcher   (69   Vt.   69; 

37  L.  R.  A.  840),  789. 
Spreckles    Sugar  Refining   Co.  v. 

McClean  (109  Fed.  Rep. 

76),  652. 
Springer  v  United  States  (102  U. 

S.  586),  648. 
Springfield  v.  First  National  Bank 

(87  Mo.  441),  305. 


TABLE  OF  CASES  CITED. 


815 


References 

Stanley  v.  Supervisors  of   Albany 
(121  U.  S.  535),  324,  333, 

625,  711,  717. 
V.  Supervisors   (15   Fed.  Rep. 

483),  335. 
Stapylton   v.  Thaggard    (91  Fed. 

Rep.  93;  33  C.  C.  A.  353), 

301. 
State  V.  Agee  (83  Ala.  110),  151. 
V.  Alston  (94  Tenn.  674),  582. 
V.  Applegarth  (Md.)   (28  L.  R. 

A.  812),  132. 
V.  Auditor  (47  La.  Ann.  1679), 

557. 
V.  Barker  (179  U.  S.  279),  616. 
V.   Bensberg  (101    Wise.  172), 

599. 
V.  Bracco  (103  N.  C.  349),  152. 
».  Butler  (3  Lea  (Tenn.)  222), 

36. 
V.   Caldwell  (127  N.   C.    521), 

165. 
V.   Cheney    (45   W.   Va.   478), 

396. 
V.    Corson  (65  N.  J.   L.   502), 

206. 
V.  Engle  (34  N.  J.  L.  425),  125. 
V.  First  National  Bank  (4  Nev. 

348),  301. 
V.  Fondulac(42  Wise.  287), 471. 
V.  Frappart  (31  La.  Ann.  340), 

•     205. 
V.  Freneh  (17  Mont.   54),  601. 
V.  French  (109  N.  C.  722),  158. 
V.  Furbush  (72  Me.  493),  144. 
V.  Garbruski  (111  Iowa,  496), 

601. 
V.   Gardner  (Ohio)    (51   N.   E. 

136),  599. 
V.  Gorham  (115N.  C.  721),  164. 
V.  Gorman  (40  Minn.  232),  581. 
V.  Hamlin  (86  Me.  495),  582. 
V.  Harrington  (68Vt.  622),  162. 
V.  Henderson   (160  Mo.  190), 

582. 


are  to  Pages. 

State  V.  Hoyt  (71  Vt.  59),  597. 
V.  Hubbard  (12  Ohio  Dec.  87), 

599. 
V.  Leffiagwell  (54  Mo.  458),  439. 
V.  Lichtensteia  (44  W.  Va.  99), 

168. 
V.  Loper  (46  N.  J.  L.  .321),  206. 
V.  McGinnis  (37  Ark.  362),  144. 
V.  Mayor  (63  N.  J.  L.  547),  15. 
V.  Newark  (8  Vroom.  (N.  J.). 

415),  433. 
V.  North  (27  Mo.  464),  143. 
V.  O'Connor  (5  N.    Dak.   629), 

169. 
V.  Osawkee  Township  (14  Kan- 
sas, 418),  417. 
V.  Parsons  (124  Mo.  436),  120. 
V.  Rankin   (76  N.  W.  Rep.  299; 

11  So.  Dak.  144),  158. 
V.  Reis  (38  Minn.  371),  456. 
V.  Richards    (32  W.  Va.    348), 

162. 
V.  Robt.  P.  Lewis  Co.  (72  Minn. 

87;  42  L.  R.  A.  629),  482. 
V.  Ross  (23  N.  J.  L.)  (3  Zab.) 

517),  631,  534. 
V.  Smithson  (106  Mo.  149),  167. 
V.  Snoddy  (128  Mo.  523),  166. 
u.  Sponaugle  (45  W.  Va.  415; 

43  L.  R.  A.  727),  396. 
V.  Stevenson  (109  N.  C    730), 

145. 
V.  Stoll  (17  Wall.  42.5),  54, 
V.  Wagner  (77  Minn.  483),  153. 
V.  Wessel!  (109  N.  C.  735),  166. 
V.  Thomas    (26  N.  J.  L.    181), 

517,  545, 
V.  Travelers'  Ins.  Co.  (73  Conn. 

255),  515,  564. 
V.  Weyerhauser  (68  Minn.  353), 

393. 
V.  Weyerhauser  (72  Minn.  519), 

82. 
V.  Wittlesey    (17   Wash.    447), 

400. 


816 


TABLE  OF  CASES  CITED. 


References 

State  V.  Williams  (68  Conn.   131), 
441. 
V.  WilliQi^iiara  (9  Wyo.  290;  62 
Pac.  Eep.  797),  165,  599. 
V.  Zophy    (84  N.  W.  Rep.  391; 
14  S.  Dak.  319),  168. 
State  Board  of  Equalization  v.  Peo- 
ple (191  111.  528),  629. 
State  Board  of  Tax  Commissioners 
V.     Holliday    (150     Ind. 
216),  551. 
State  ex  rel.  v.  Ashbrook  (154  Mo. 
375),  589,  595. 
V.  County  Court  (69  Mo.  454), 

635. 
V.  Insurance    Co.     (115    Ind. 

257),  177. 
V.  Robinson  (35  Neb.  401;  17  L. 

R.  A. 383), 423. 
V.  Severance  (55  Mo.  378),  266. 
V.  Stephens  (146  Mo.  662),  247. 

564. 
V.  Switzer  (143  Mo.  317),  416, 

419,  581. 
V.  Western    Union    Telegraph 
Co.   (165  Mo.  502),  277, 
617. 
V.   Wood  (155  Mo.  425),  739. 
State  ex  rel.  Richards  v.  Cincinnati 
(Ohio)     (27     L.    R.    A. 
737),  415. 
State  ex  rel.  Schurz  v.  Cook   (148 

U.  S.  397),  81. 
State  ex  rel.  Schwartz  v.  Ferris  (53 
Ohio  St.  314;  30  L.  R.  A. 
2180,  581. 
State  Freight  Tax  Case  (15  Wall. 

232),  248. 
State  Railroad  Tax  Cases  (92  U.  S. 
575),  266,  382,  591,  709, 
715. 
State  Tax  on  Foreign  Held  Bonds 
(15  Wall.  300),  498,  502, 
610,  511,  513. 


lire  to  Pages. 
State  Tax  on  Railway  Gross  Re- 
ceipts   (15    Wall.    284), 

248,  256,  262. 
State  Tonnaiie  Tax  Cases  (12  Wall. 

204),  215. 
Steamship  Co.  v.  Port  Wardens  (6 

Wall.  31),  215. 
Stearns  v.   Minnesota  (179  U.    S. 

223;,  69. 
Stephens  v.  Railroad  Co.  (13  Blatch- 

ford,  104),  522. 
Stockard  v.  Morgan  (185  U.  S.  27), 

155. 
Stockton,  Ex  parte  (33  Fed.  Eep. 

95),  152. 
Stone  V,   Bank  of  Commerce   (174 

U.  S.  412),  63. 
Stoutenburgh  v.  Hennick  (129  U- 

S.  141),  689. 
Stratford  u.  Montgomery  (110  Ala. 

619),  155. 
Stratton   v.    Collins  (43   N.  J.   L. 

562),  552. 
Strauder  v.  West  Virginia  (100  U. 

S.  303),  351,  358. 
Street  R.  R.   Co.  v.    Morrow   (87 

Tenn.  406),  515. 
Strelght  u.  Durham  (10  Okla.  361), 

382. 
Strouse  v.  Galesburg  (89  111.  App. 

504),  602. 
Stuart    V.    Jefferson    Police   Jury 

(116  U.  S.  135),  77. 
V.  Palmer  (74  N.  Y.  183),  379, 

466,  471. 
Sturgis  V.  Carter  (114  U.  S.  611), 

391,  540. 
Succession  of  Rixner  (48  La.  Ann. 

552,  32    L.  R.    A.    177), 

39,  40. 
Sullivan  v.  Sheehan  (89  Fed.  Rep. 

247),  187, 
Sumpter  Co.   v.  National  Bank  of 

Gainesville  (62  Ala.  464), 

304. 


TABLE  OF  CASES  CITED. 


817 


References 

Supervisors  v.  Davenport    (40  111. 

197),  505. 
V.  Stanley  (105  U.  S.  305>,  324. 
Sutton  V.  Hate  (9G  Tenn.  710),  3G5. 
Swan,  lu  re  (150  U.  S.  G37),  714. 
Svpanu  V.   Muiual    lleserve    Fund 

Assn.     (100     Fed.    Rep. 

922),  187. 
Swift,  lure  Estate  of  (137  N.  Y.  77; 

(18  L.  R.  A.    709),  549. 
Swofford  V.   Templeton  (185  U.  S. 

487),  706. 
Swope  V.  Purdy  (1  Dillon,  350),  29. 

T. 

Taggart  v.  Claypool  (145  Ind.  596; 

32  L.  R.  A.  586),  415. 
Talbott  V.  Silver  Bow  County  (139 
U.  S.  438),  310,  318,  320, 
686. 
Talbuttw.  State  (39  Tex.  Grim.  Rep. 

64),  152. 
Tappanu.  Merchants  National  Bank 
(19  Wall.  490),  306,  515. 
Taylor  v.  L.  &  N.  R.  R.  Co.  (31   C. 
C.  A.  537;  85  Fed.  Rep. 
302;  86  Fed.    Rep.  350), 
622,  717. 
V.  Palmer  (31  Cal.  240),  443. 
V.  St.  Louis  County  Court  (47 

Mo.  594),  ,505. 
V.  Thomas  (22  Wall.  479),  55. 
Telegraph  Co.  v.  Texas  (105  U.  S. 

460),  237. 
Tennessee  v.  Scott   (98  Tenn.  254; 
36  L.  R.  A.  461),  157. 
V.  Sneed  (90  U.  S.  69),  55,  694. 
V.  Union  &  Planters  Bank  (152 

U.  S.  454),  699. 
V.  Whitworlh   (117  U.  S.  129), 
88,  90,  91,92,  93. 
Texas  V.White  (7  Wall.  1.  c.  721),  3. 
The  Lotus  No.  2.  (26  Fed.  Rep.  637), 
200. 


are  to  Pages. 

Thomas,  Ex  parte  (71  Cal.  204),  152. 
Thomas  v.  Gay  (169  U.  S.  283),  30, 

569. 
Thompson  v.  Allen  County  (115  U. 

S.  550),  727,  728. 
Thomson    v.    Pacific    Railroad    (9 

Wall.    579),    30. 
Thorndlke   v.   City    of    Boston   (1 

Metcalf,  242,245),  530. 
Thornton,  Ex  parte   (12  Fed.  Rep. 

538),  141. 

Thyson  v.  State  (28  Md.  577),  582. 

Tide  Water  Pipe  Co.  v.  Assessors 

(57   N.   J.    L.    516),  192, 

261. 

Tiernan   v.  Hinker  (102  U.  S.  123), 

1C8. 
Toralinsonv.  Branch  (15  Wall.  460), 
90. 
V.  Jessup  (15  Wall.  454),  85. 
Tonawanda  y.  Lyon  (181  U.  S.  389), 

483,  486. 
Township  of  Pine  Grove  v.  Talcott 
(19  WaU.  666,  676),  429. 
Transportation  Co.  v.    Parkersburg 
(107  U.  S.  691),  217. 
V.   Wheeling    (99    U.    S.   273), 
198,  199. 
Trask   y.  Maguire  (18   Wall.  391), 

89. 
Travelers'  Ins.  Co.  v.  Connecticut 

(185  U.  S.  364),  515. 
Traver  v.  Merrick  County  (14  Neb. 

327),  411. 
Tregea  v.  Modesto  Irrigation  Dis- 
trict (164  U.  S.  179),  707. 
Truscottu.  HurlbutCo.  (19  C.  C.  A. 

374),  29. 

Trustees  of  Cincinnati  &  So.  R.  R. 

Co.  V.  Guenther,  Trustee 

(19  Fed.  Rep.  395),  627. 

Tucker  v.  Ferguson  (22  Wall.  627), 

26,  84,  86. 
Turner  v.  Maryland  (107  U.  S.  38), 
134. 


818 


TABLE  OF  CASES  CITED. 


References 

Turner  v.  New  York  (168  U.  S.  90), 

402. 
V.  Smith  (U  Wall.  553),  648. 
V.    State  (41    Tex.  Crirn.  Rep. 

545),  165. 
Turpin  v.  Burgess  (117  U.  S.  504), 

127,  662,  663. 
Tuthill,  In   re  (163  N.   Y.  133;  49 

L.  R.  A.  781),  449. 
Tyerman,  In  re  (48  Fed.  Rep.  167), 

152. 
Tyler,  In  re  (149   U.  S.  164),  718, 

723. 
V.  Cass  County  (142  U.  S.  288), 

707. 

u. 

Ulsh  V.  Perry  County  (7  Pa.  Dist. 

Rep.  488),  17. 
Union  and  Planters  Bank  v.  Mem- 
phis (49  C.  C.  A.    455), 
92. 
Union  Pacific  R.  R.  Co.  v.  Chey- 
enne   (113    U.    S.    516), 
739. 
Union  Refrigerator  Transit  Co.  v. 
Lynch   (177  U.  S.    149), 
246. 
Union  Trust  Co.  v.  Wayne  Probate 
Judge    (125  Mich.   487), 
381. 
United  States  v.  American  Bell  Tel. 
Co.   (29  Fed.  Rep.  217), 
188. 
V.  Buutin  (10  Fed.  Rep.  730), 

604. 
V.  County  of  Macon  (99  U.  S. 

682),  489,  729. 
V.  Erie  R.   R.   Co.  (106  U.  S. 

327),  683. 

V.  Ft.  Scott  (99  U.  S.  152),  489. 

77.  Gettysburg  Elec.  R.  R.  Co. 

(160  U.  S.  668),  422,  427. 

V.   Hunnewell    (13    Fed.    Rep. 

617),  684. 


are  to  Pages. 

United  States  v.  Jackson   (Federal 

Cases  No.  15,458),  209. 
V.   Johnson  County  (5  Dillon, 

207),  76. 
V.  Lee  (106  U.  S.  196),  692,  721. 
V.   Lincoln   County  (5  Dillon, 

184),  76. 
V.  Morrison  (Federal  Cases  No. 

15,465),  209. 
V.  Perkins  (163  U.  S.  625),  38. 
V.  Railroad  Co.  (17  Wall.  322), 

669,  670. 
V.  Realty  Co.  (163  U.  S.  427), 

643. 
V.  Rice  (4  Wheat.  246),  657. 
United  States  ex  rel.  v.  Carlisle  (5 

D.  C.  App.  138),  642. 
V.  New  Orleans  (98  U.  S.  381), 

728. 
United  States  Express  Co.  v.  Allen 

(39  Fed.  Rep.  714),  210. 
V.  Hemmingway  (39  Fed.  Rep. 

60),  233. 
United   States  Trust  Co.   v.  New 

Mexico  (183  U.  S.  535), 

389. 
University  v.  People  (99  U.  S.  309), 

53. 

V. 

Valle  V.  Ziegler  (84  Mo.  214),  535. 
Van  Allen   v.   Assessors   (3  Wall. 

573),  310. 
V.  Commissioner  (4  Wall.  244), 

312. 
Van  Brocklin  v.  Tennessee  (117  U. 

S.  151),  17,  23,  24,  648, 

669. 
Vanceburg  &  St.  L.  Turnpike  Co. 

t?.  Maysville    (6.^  S.    W. 

Rep.  749),  387. 
Vanderbilt,  In  re  (50  N.  Y.  App. 

Div.  240),  78. 
Van  Slyke  u.  The  State  (23  Wise. 

655),  329. 


TABLE  OF   CASES  CITED. 


819 


References  are  to  Pages. 


Vaughan    Machine    Co.  v.   Light- 
house (71  N.  Y.  S.  799), 

187. 
Veazie  Bank   v.  Fennell  (8  Wall. 

533),  673. 
Vermont  &  Canada  R.  R.   Co.  v. 

Vermont  Cen.  R.  R,  Co. 

(63   Vt.  1;   10   L.   R,    A. 

565),  255. 
Vicksburg  v.  Tobin  (100  U.  S.  430), 

217. 
Vicksburg  R.  R.  Co.  v.  Dennis  (116 

U.  S.  665),  87. 
Vines  v.  State  (67  Ala.  73),  144. 
Virginia  Coal  Co.   v.  Thomas  (97 

Va.  527),  402. 
Virginia  Coupon  Cases  (114  U.  S. 

269),  57,  722. 
(leter  series),  (135  U.  S.  662), 

58. 
Virginia,  Ex  parte  (100  U.  S.  389, 

347),  354. 
Voight  V.  Detroit  (184   U.  S.  115), 

459,  470,  475. 
Von   Hoffman  v.  Quincy  (4  Wall. 

535),  75. 

w. 

Wagner  v.  Meakin  (33  C.  C.  A.  577), 

187. 
Wagoner  v.  Evans  (170  U.  S.  588), 

30. 
V.  Loomis    (37   Ohio   St.    571), 

615. 
Waite  V.  Dowley    (94   U.  S.  527), 

306,  344. 
Walker  u.  Jacks  (31  C.  C.  A.  462), 

504. 
Walkley  v.  Muscatine  (6  Wall.  481), 

727. 
Walling  O.Michigan  (116  U.  S.  446), 

140,  168. 
Walsh  V.  Denver   (11   Colo.  App. 

523),  599. 
V.  King  (74  Mich.  350),  612. 


Walston  V.  Nevin    (128  U.S.  578), 

452,  459,  464. 
Walters   v.   Railroad  Co.  (68  Fed. 

Rep.  1002),  522. 
Walton  w.  Augusta  (104  Ga.   757), 

156. 
Warburton  v.   White    (176   U.    S. 

484),  731. 
Ward  V.  Flood  (48  Cal.  51),  603. 
V.   Maryland    (12   Wall.    419), 

139,  144, 
V.  State  (31  Md.  279),  139. 
Waring*  v.   The    Mayor   (8  Wall. 

110),  123. 
Warner  v.  City  of  New  Orleans  (31 

C.  C.  A.  238),  487. 
Washington  v.  Nashville  (1   Swan 

(Tenn.)  177),  433. 
Washington  University   v.  Rowse 

(8    Wall.    439;    42    Mo. 

326), 50. 
Waters-Pierce  Oil  Co.  u,  Texas  (177 

U.  S.  28),  173,  182,  356. 
Webber  v.  Virginia  (103  U.  S.  344), 

36,  144. 
Webster  v.  Bell  (15  C  C.  A.  360), 

233. 
V.  Fargo    (9  N.  Dak.  208;   181 

U.  S.  394),  480,  483,  486. 
Weismer  v.  Douglas  (64  N.  Y.  91), 

422. 
Welch  V.  Cook  (97  U.  S.  541),  83. 
Welland  v.  Presbury  (14  Wall.  676), 

459. 
Wells  V.  Savannah  (181  U.  S.  531), 

86. 
V.  Weston    (22   Mo.    384),  405, 

415. 
Wells  County  v.  Fahlor  (132   Ind. 

426),  471. 
Wells    Fargo  &  Co.   v.   Crawford 

County  (63  Ark.  576;  37 

L.  R.  A.  371),  520. 
Welton  V.  Missouri  (91  U.  S.  275), 

142,  144. 


820 


TABLE  OF  CASES  CITED. 


References  are  to  Pages. 


Western  Union  Tel.  Co.  v.  Alabama 

(132  U.  S.  472),  255. 
V.  City  of  Freemont  (43  Neb. 

499;26L.  R.  A.  706),233. 
V.  Indiana  (165  U.  S.  304),  389. 
V.    Massachusetts    (125   U.  S. 

530),  32,  235,  255,  277. 
V.  Poe  (64  Fed.  Rep.  9),  285. 
V.    Richmond  (26  Grattan,   1), 

226. 
V.  State  (55  Texas,  814),  226. 
V.  Taggart  (163  U.  S.  1),  277, 

285. 
Weston    V.    Charleston    (2   Peters 

1.  c.  481),  14. 
West  Wisconsin  R.  R.  Co.  v.  Super- 
visors (93  U.  S.  595),  84. 
Weyerhauser     v.    Minnesota    (176 

U.  S.  550),  392. 
Wheeler  v.  Jackson  (137  U.  S.  245), 

81,  401. 
Wheless  v.   St.   Louis  (180  U.  S. 

379),  697. 
Whitbeck  v.  Mercantile  Bank  (127 

U.  S.  193),  325,  334. 
White,  In  re    (43  Fed.  Rep.  913), 

152. 
Whiting  V.  Fondulac  Railroad  Co, 

(25  Wise.  167),  429-. 
Whiting's  Estate,  In  re  (150  N.  Y. 

27;  34  L.  R.  A.  232),  549. 
Whitney  v.   Robinson   (124  U.   S. 

190),  668. 
Wiggins  Ferry  Co.  v.  East  St.  Louis 

(107  U.  S.  365),  83,  210, 

238. 
Wight  V.  Davidson  (181  U.  S.  371), 

459,  483,  485. 
Wilcox  V.   Ellis  (14   Kansas,  588) 

505. 
Willard  v.  Presbury  (14  Wall.  676), 

688. 
Williams  v.  Eggleston  (170  U.  S. 

304),  441. 
V.  Fears  (179  U.  S.  270),  526, 


Williams  v.  New  Jersey  (180  U.  S. 
189),  78. 
V.  Reese  (2  Fed.  Rep.  882),  600. 
V.  Supervisors  (122  U.  S.  154), 

333,  711,  717. 
V.   Weaver  (75  N.  Y.    32;  100 
U.  S.  547),  707,  736. 
Willis  V.  Miller  (29  Fed.  Rep.  238), 

58. 
Wilmington  R.  R.  Co.  v.  Ashbrook 
(146  U.  S.  301),  69,86. 
V.  Reid  (13  Wall.  264),  69. 
Wilson,  In  re  (D.  C.)  (12  L.  R.  A. 

625),  164. 
Wilson  V.  Gaines  (103  D.  S.  417). 

89. 
Winona  ;&  St.  Peter  Land  Co.    v. 
Minnesota     (159    U.    S. 
626),  393. 
Wisconsin    Central    R.    B.   Co.  v. 
Price  County  (133  U.  S. 
496),  24. 
Wisconsin  Central  R.  R.  Co.  v.  Tay- 
lor Co.  (52  Wise.  37),  552. 
Witherspoon    v.  Duncan  (4    Wall. 

210),  23. 
Wolff  V.  New  Orleans    (103  U.    S. 

358),  76. 
Wong  Yung  Quy,  In  re  (2  Fed.  Rep. 

624),  133. 
Woodman  v.  Ely  (2  Fed.  Rep.  839), 
697. 
V.  Latimer  (2  Fed.  Rep.    842), 
697. 
Woodruff  V.  Parham  (8  Wall.  123), 
113,  665. 
V.  Trapnall  (10  How.  190),  54. 
Woodward  v.  Ellsworth   (4   Colo. 

580),  301. 
Woolfork  V.  Buckner  (60  Ark.  163, 

167),  403. 
Wrought  Iron  Range  Co.  v.  Carver 
(118  N.  C.  328),  162. 
V.  Johnson  (84  Ga.  754),  151. 


TABLE  OF  CASES  CITED. 


821 


References  are  to  Pages. 


Wurts  V.  Hoagland  (114  U.  S.  606), 
443,459. 

T. 

Yazoo  &  Miss.  Valley  R.  R.  Co.  v. 
Adams,  180  U.S.  41),  702. 
V.  Adams,  181  U.  S.  580),  91. 


Yick  Wo  V.  Hopkins  (118  U.  S.  356), 

355,  36G. 
York,  City  of,  v.  C.  B.  &  Q.  R.  R. 

Co.  (56  Neb.  572),  233. 
Yost  V.  Lake  Erie  Trausportation 

Co.  (112  Fed.  Rep.  746), 

201. 


INDEX. 

References  are  to  Sections. 

A. 

AGENCY, 

of  U.  S.  exempt  from  State  taxation.     See  State  Taxing  Power. 

of  State,  protection  uoder  Fourteenth  Amendment  against,  306. 

of  State,  taxation  of  State  securities  not  tax  upon,  423. 

of  State,  exempt  from  Federal  taxation,  501. 
AMOUNT, 

necessary  to  jurisdiction  of  U.  S.  Circuit  Court.     See  Jurisdiction 
OF  U.  S.  C.  C. 
APPORTIONMENT, 

basis  of,  in  special  assessments.     See  Special  Assessments. 

basis  of,  in  special  assessments.     See  Special  Benefits. 
APPROPRIATION, 

Federal  power  of.     See  Congress. 
AREA  AND  FRONTAGE  RULES  (ip  special  assessments). 

apportionment  of  expense  by,  valid,  366,  367,  371,  372. 

legislative  discretion  to  iix  upon.     See  Legislative  Discretion. 

effect  of  necessity  for  notice  and  hearing,  377. 

Norwood  V.  Balier  on,  383. 

effect  of  Norwood  v.  Baker  as  to,  in  State  and  U.  S,  Circuit  Courts, 
384. 

sustained  and  Norwood  v.  Balier  confined  to  special  facts,  385. 

assessment  on  each  lot  for  cost  of  improvement  in  front  valid,  387. 

exceptional  circumstances  may  render  invalid  in  special  cases,  387, 
389. 
ARRIVAL  (in  State), 

meaning  of,  in  Wilson  Bill,  108,  124. 
ASSESSMENT  FOR  TAXATION, 

valuation  for.     See  Valuation  for  Assessment. 

State  may  fix  date  to  which  ownership  subject  to,  shall  relate,  333. 

retrospective  of  property  not  assessed  valid,  333. 

of  property  uudei'-assessed.     See  Reassessment. 

discrimination  in,  through  relative  overvaluation,  is  fraudulent,  474. 
ASSESSORS, 

practice  of  valuation  of,  293,  296. 

exercise  quasi  judicial  power,  321 . 

assessment,  unequal  through  fraud  of,  may  be  vacated.  466. 

(823) 


824  INDEX. 

References  are  to  Sections. 

ASSESSORS —Continued. 

proof  of  fraud  of,  rarely  obtainable,  467. 

presumed  to  perform  official  duty,  468,  469.     See    Valuation  FOik 
Assessment  and  Personal  Liability. 
AVERAGE  IN  HABITUAL  DSE, 

rule  of,  in  taxation  of  rolling  stock.     See  Interstate  Carriers. 

rule  of,  involves  mileage  apportionment,  224. 

B. 

BANK, 

of  U.  S.J  exempt  from  State  taxation,  6,  7,  8. 

of  U.  S.,  right  of  Sta'e  to  tax„  distinguished  from  power  of  U.  S. 

to  tax  State  bank. 
of  U.  S.,  property  and  shares  within  State  subject  to  State  tax,  7. 
capital  stock  invested  in  U.  S.  securities  exempt,  17. 
issue  of,  receivable  for  taxes.    See  Contract. 
notes  of,  issued  in  seceding  States,  not  ipso  facto  void,  50. 
national.     See  National  Bank. 

deduction  of  debts  of  unincorporated,   not  discrimination  against 
national  banks,  288. 
BOARD  OF  REVIEW, 
purpose  of,  464. 

inadequacy  of,  to  remedy  unequal  assessments,  465. 
when  appeal  from  decision  of,  lies  to  courts,  476. 
remedy  against,  excessive  tax  mast  be  sought  before,  when,  536. 
BONDS, 

of  District  of  Columbia  exempt  from  State  tax,  12. 
of  municipality.    See  Municipality. 
BOUNTY, 

legislative,  confers  no  contractual  rights,  82. 
not  a  public  purpose  for  State  taxatiou.     See  Public  Purpose. 
Supreme  Court  declines  to  pass  oa  validity  of  Federal  bounty.     See 
Congress. 
BRIDGE, 

State  power  to  establish,  over  navigable  waters,  195. 

intra- state  distinguished  from  interstate,  195. 

property  in  interstate  taxable,  195. 

interstate,  how  taxable  by  State,  197,  198. 

taxation  of  interstate,  not  interference  with  interstate  commerce, 

198. 
aid  to  company  building  is  public  purpose  in  taxation,  353. 
BUILDING  AND  LOAN  ASSOCIATIONS, 

funds  of,  not  "  other  moneyed  capital,"  285. 
BURDEN  OF  PROOF, 
in  tax  litigaoion,  550. 


INDEX.  825 

References  are  to  Sections. 

BUSINESS  CORPORA.TION, 

stock  in,  not  •'  other  moneyed  capital,"  283. 

C. 

CANAL  COMPANY, 

aid  to,  is  lawful  public  purpose,  353. 
CERTIORARI, 

review  of  valuation  of  assessors  by,  323. 

what  hearing  is  sufBcieut  in  review  by,  334. 

not  adequate  remedy  iu  Federal  courts,  537. 

not  adequate  remedy  where  facts  must  be  shown  de  hors  the  record, 

537, 
CLASSIFICATION  IN  TAXATION, 

required  to  be  reasonable  by  guaranty  of  due  process  of  law,  313. 

to  provide  summary  process  for  enforcement  of  delinquent  tax,  330. 

in  imposition  of  penalties  upon  delinquents,  332. 

necessity  for,  in  levy  of  general  property  tax,  437. 

plenary  power  of  legitslature  to  make,  438,.  439,  440. 

distinguished  from  illegal  discrimiaation,  438,  439,  440, 452,  455.    See 

Discrimination. 
requirements  of  State  constitutions  as  to,  438,  448. 
equal  protection  of  laws  recognizes  right  of,  438,  439. 
specification  of  corporate  securities  constitutes  valid,  439,453,  454. 
specification  of  railroads  constitutes  valid,  440,  452,  455. 
involves  power  to  assess  different  classes  by  different  methods,  441, 

454. 
special  method  of  assessing  railroad  property  sustained,  441. 
special  assessment  on  railroads  to  pay  railroad  commissioners  is 

valid,  441. 
admits  of  allowing  appeal  to  only  one  class  of  taxpayers,  442. 
admits  of  allowing  assessors  two  chances  to  value  corporate  prop- 
erty, 442. 
of  foreign  corporations  valid,  443. 

admits  of  exemption  of  producers  in  license  taxation,  444. 
reasonable  basis  for,  essential,  444,  452,  454,  457,  458. 
classification  for  police  legislation  compared  with,  445. 
valid  in  criminal  statute,  445. 
requirement  that  defendant  railroad  pay  plaintiff's  attorney's  fee, 

when  valid,  446. 
inequality  of  burden  caused  by,  does  not  establish  invalidity  of  tax, 

447. 
of  inheritances  valid,  448,449. 

in  inheritance  taxatiun  held  to  violate  State  constitutions,  448. 
in  inheritance  taxation  by  exemptions,  448,  449. 


826  INDEX. 

References  are  to  Sections. 

CLASSIFICATION  IN  TAXATION —  Continued. 

in  inheritance  taxation  by  discrimination  against  non-residents  void, 
448. 

of  inheritances,  Supreme  Court  on,  449. 

in  license  taxation  by  amount  of  sales  \  alid,  450. 

of  property  by  amount  invalid,  451. 

by  exemption  of  classes  valid,  452,  453. 

exempting  some  of  class  invalid,  449,  452,  459. 

by  exempting  for  eflBciency,  453. 

what  consti  utes  reasonable  basis  for,  454,  46 L, 

must  not  rest  on  mere  ownership,  455. 

excepting  mortgages  of  quasi  public  corporation  is  not,  455. 

of  merchants  according  to  number  of  clerks  employed,  456. 

specification  of  employers  of  foreign-born  males  is  not,  457. 

discrimination  between  residents  and  non-residents  is  invalid,  468. 
See  Discrimination. 

in  license  taxation,  when  illegal,  459. 

between  wholesale  and  retail  merchants  valid,  459. 

between  manufacturing  and  quasi  public  corporations  and  other  cor- 
porations valid,  459. 

between  gas  companies  and  other  manufacturing  companies,  459. 

between  commission  merchants  and  produce  dealers  invalid,  459. 

in  license  taxation  according  to  residence  of  party  void,  459. 

between  merchants  doing  business  in  different  parts  of  city  void,  459- 

of  polls  exempting  persons  who  voted  at  last  election  void,  459. 

of  peddlers  exempting  those  having  served  in  army  or  navy  void,  459. 

between  non-resident  insurance  associations  and  resident  insurance 
corporations  valid,  459. 

requiring  license  and  bond  from  liquor  dealers  only  valid,  459. 

discriminating  against  negroes  in  expenditure  of  school  funds  void, 
460. 

between  races  as  to  expenditure  of  school  funds,  when  valid,  461. 

excluding  railroad  taxed  from  benefit  of  tax  void,  461. 

summary  of  requirements  of  equal  protection  of  laws  as  to,  462. 
COMMERCE, 

interstate.     See  Interstate  Commerce. 

necessity  for  national  control  over,  98. 

necessity  for  national  control  over,  Marshall,  C.  J.,  on,  98. 

necessity  for  national  control  over,  Justice  Miller  on,  98. 

necessity  for  national  control  over,  Madison  on,  99. 

national  control  over,    comprehensive    limitation  of    State  taxing 
power,  100,  102,  104. 

construction  of  term,  101. 

includes  navigation  of  navigable  rivers  within  States,  101. 


INDEX.  827 

References  are  to  Sections. 

COMMERCE  —  Continued. 

extent  of  national  control  over,  101. 
imports  and  exports.     See  Imports  and  Exports. 
tax  on  importer  is  regulation  of,  104. 

regulation  of   by  State  during  non-action  of  Congress,  105,  106. 
Congressional  consent  to  State  regulaton  of,   107. 
COMMERCIAL  BROKERS, 

taxable  for  doiu'z  general  commission  business,  148,  144. 
not  taxable  for  doing  bus^iness  exclusively  for  non-residents,  145,  146. 
COMMERCIAL  TRANSIT, 

property  in,  not  subject  to  State  tax,  120. 
what  constitutes,  121,  122,  123. 
when  terminaied,  124. 
CONDITIONS, 

for  admission  of  foreign  corporations.     See  Foreign  Corporation. 
CONGRESS, 

power  of,  to  acquire  lands  in  State,  21. 
power  of,  to  regulate  commerce.     See  Commerce. 
effect  of  coasting  license  granted  by,  101,  100. 
effect  of  license  to  build  interstate  bridjte  granted  by,  197. 
effect  of  act  of,  relating  to  telegraph  companies,  208,  216,  249. 
acts  of,  authorizing  State  taxation  of  national  banks,  2G4,  265. 
act  of,  enforcing  Fourteenth  Amendment,  310. 
validity  of  appropriation  by,  to  pay  b(jUQties,  432,  483. 
validity  of  appropriation  by,  to  i)ay  moral  claims,  482,  483. 
taxing  power  of.     See  Federal  Taxing  Power. 
judiciary  when  concluded  by  decision  of,  5i3. 
CONSTITUTION, 

Of  United  States, 

effect  upon    State  power   of    taxation.     See    State,    Taxing 

Power  of. 
effect  upon  Federal  power  of  taxation.    See  Congress,  Taxing 

Power  of. 
express  limitations  upon  State  taxing  power,  2,  3,  97. 
express  limitations  upon  Federal  taxing  power,  4. 
is  supreme  law  of  land,  5. 
Of  State, 

in  relation  to  special  assessments,  366. 

operates  as  restraint  upon  power  of  State  legislature,  431. 

requirement  of  uniform  rate,  as  to  power  of  classification,  438, 

448. 
provisions  of  in  relation  to  inheritance  taxation,  448. 


828  INDEX. 

References  are  to  Sections. 

CONSTRUCTION  OF  STATE  LAW, 

decision  of   State  court  that  only  State  franchises  are  taxed  con- 
clusive, 31. 

independent  judgment  of  Supreme  Court  as  to  existence  of  contract. 
See  Contract. 

by  State  court  binds  U.  S.  Supreme  Court,  62,  64,  344,  362,  382,  432, 
547. 

decision  by  State   court   that  State  tax  law  requires  hearing  con- 
clusive, 324. 
CONTRACT, 

legislative  grant  is,  39,  67,  68. 

of  exemption.    See  Exemption. 

U.  S.  Supreme  Court  determines  existence  of,  44,  58,  59,  60,  80. 

of  State  to  receive  bank  notes,  e'c  ,  for  taxes,  49,  50. 

change  of  remedy  not  impairment  of  contract,  52,  74. 

tax  receivable  coupons  when  not  taxable,  58,  72. 

what  constitutes  adequate  remedy  to  compel  receipt  of  coupons,  54, 
56,  57. 

question  of,  when  properly  presented  to  independent  judgment  of 
Supreme  Court,  60. 

decision  of  State  court  on,  Supreme  Court  when  concluded  by,  60, 
61,62. 

when  Supreme  Court  leans  to  agreement  with  State  court  as  to,  63. 

decision  of  State  court  that  State  constitution  authorizes  only  re - 
pealable  exemption,  64. 

only  impaired  by  subsequent  law,  65,  66. 

of  exemption,  what  constitutes,  67,  68,  69. 

obligation  of,  what  is,  71. 

does  deduction  of  tax  from  interest  on  corporation  bonds  impair 
obligation  of,  71,  399. 

when  law  impairs  obligation  of,  71,  78. 

municipal  tax  on  municipal  bonds  held  by  non-residents  void,  72. 

nature  of  governmental,  72. 

judgment  on  exempted  bond  not  taxable  by  State,  72. 

right  to  lax  as  remedy,  73. 

obligation  to  perform  not  lessened  by  destruction  of  taxables,  73. 

contractual  and  governmental  legislation  distinguished,  75. 

municipal  charter  not.    See  Municipality. 

not  impaired  by  retrospective  governmental  legislation,  79. 

Justice  Miller  on  legislative,  80. 

judgment  against  municipality  for  tort  of  mob  is  not,  84. 

of  municipality  lacking  public  purpose  void,  352. 
COPYRIGHTS, 

how  taxable  by  States,  32. 


INDEX,       .  829 

References  are  to  Sections. 

CORPORATE  FRANCHISE, 

tax  ou,  distioguished  from  property  tax,  17. 
defined,  18. 

of  railroad  is  property,  68. 

grant  of,  compared  to  admission  of  foreign  corporation,  168. 
of  foreign  corporation  holding  U.  S.  bonds  valid,  170. 
of  foreign  corporation  engaged  in  importing  business,  171. 
of  interstate  carrier,  tax  on,  measured  by  gross  receipts,  232,  234. 
exercise  of,  in  State  taxable  by  State^  258. 
of  national  bank  not  taxable  by  State,  268. 
CORPORATION, 

elements  of  taxable  value  in,  93. 

shares  of.     See  Shares. 

franchise  of.     See  Corporate  Franchise  and  Franchise. 

exemption  of  shares  does  not  extend  to  capital  stock  and  vice  versa, 

94,95. 
capital  stock  does  not  include  surplus,  95. 
foreign.     See  Foreign  Corporation. 
not  citizen  under  U.  S.  Constitution,  157. 
is  person  under  Fourteenth  Ameodment,  157,  308. 
what  constitutes,  161. 
not  "subject"  under  U.  S.  treaty,  162, 
valuation  of  capital  stock  by  adding  market   values  of  stock  and 

bonds,  240,  453,  476. 
intangible  property  of,  properly  considered  in    valuation,  265,   256, 

258. 
VFhether  tax  on  property  and  shares  of,  is  double  taxation,  298. 
jurisdiction  of  State  over  stock  of,  for  taxation.     See  Jurisdiction 

OF  State. 
taxation  of,  distinguished  from  taxation  of  person,  406. 
what  is  valid  classification  of  property  of.     See  Classification. 
injunction  granted  stockholder  to   restrain,  from  paying  illegal  tax, 
533,  549. 

COUPONS, 

tax  receivable,  not  taxable.     See  Contracts, 
license  to  sell  liquor  not  payable  in  tax  receivable,  56. 

D. 

DEBTS, 

of  United  States,  what  are.     See  United  States. 
DILEMMA, 

of  courts  in  remedying  discrimination  by  relative  undervaluation  of 
other  property.     See  Valuation. 


830  INDEX. 

References  are  to  Sections. 
DIRECT  TAX, 

constitutional  limitation  on  power  of  Congress  to  levy,  486. 
capitation  tax  is,  486. 

tax  on  real  or  personal  property,  "  solely  because  of  general  owner- 
ship" is,  489. 
tax  on  income  from  land  is,  486. 
tax  on  income  from  personal  property  is,  486. 
inheritance  tax  is  not,  487. 

in  economic  and  constitutional  senses  distinguished,  488. 
definition  of  in  Knowlton  v.  Moore,  489. 
summary  as  to  what  constitutes,  489. 
Congress  may  impose,  on  District  of  Columbia,  490. 
need  not  extend  to  territories,  490. 
tax  on  franchise  granted  by  State  not,  505. 

tax  on  sales  made  at  exchanges  or  boards   of  trade  is  not,  610. 
DISCRIMINATION  IN  TAXATION, 

of  interstate  importation  void,  III,  112,  113. 

era  of  State,  130. 

against  foreign  products  and  non-residents  forbidden,  131. 

against  non-residents  held  illegal  by  Supreme  Court,  132. 

against  non-residents  condemned  in  State  courts,  133. 

against  products  of  another  State  void,  134,  135. 

what  constitutes,  136,  149,  403. 

valid,  unless  against  foreign  products,  129,  137.  * 

must  be  more  than  incidental  disadvantage,  149. 

in  peddler's  licenses  void,  150. 

in  conditions  for  admission  of  foreign  corporations.     See  Foreign 

Corporations. 
in  wharfage  charge,  203. 
against  national  bank,  making  bank  pay  tax  for  shareholders  is  not, 

269,  291. 
against  national  bank,  assessing  shares  above  par  and  money  at 

interest  at  par,  271.     See  Other  Moneyed  Capital. 
against  national  bank,  through  taxation  of  State  banks  on  capital, 

275. 
against  national  bank,  charter  exemption  of  State  banks,  276. 
against  national  bank,  deduction  for  U.  S.  isecurities  from  other 

personalty,  276. 
against  national  bank,  where  only  taxables  are  realty,  live  stock 

and  bank  shares,  276. 
against  national  bank,  varieties  of,  277. 

against  national  bank,  ordinary  State  exemptions  are  not,  278. 
against  national  bank,  partial  exemption  of  "  other  moneyed  capital '* 

may  not  be,  278,  297. 


LNDEX.  •  831 

References  are  to  Sections. 

DISCRIMINATION  IN  TAXATION  — Continued. 

against    national    bank,   when  allegations  of    exemptions  require 

answer,  279. 
against  national  bank,  rules  of  Suprenae  Court  as  to,  280. 
against    natioual    bank,  relative    overvaluation  of    national    bank 

shares  is,  280. 
against  national  bank,    deduction  of    debts  from  other  moneyed 

capital  is,  280,  286. 
against  national  bank,  exemption  must  be  of  other  moneyed  .capital 

to  constitute,  281,  285. 
against  national  bank,  statute  authorizing  discriminating  deduction 

of  debts  not  void,  286. 
against  national  bank,  where  credits  deducted  from  include  some 

moneyed  capital,  287. 
against  national  bank,  deduction  of  debts  of  unincorporated  banks 

is  not,  288. 
against  national  bank,  through  assessor's  failure  to  assess  other 

moneyed  capital,  289. 
against  national  bank,  must  be  substantial,  289,  290. 
against  national  bank,   difference  of  tax-rate  may  not  constitute 

291,  447. 
against  national  bank,  through  difference  in  valuation,  292,  293. 
against  national  bank,  inequality  in  valuation  must  be    habitual 

and  intentional,  292,  294. 
against  national  bank,  mere  error  of  judgment  is  not,  295. 
against  national  bank,  formal  resolution  of  assessors  not  necessary 

to  constitute,  296. 
against    national  bank,   where  bank   is  not  assessed   higher  than 

true  value,  296. 
against  national  bank,  differential  taxation  of    personalty  may  not 

be,  297. 
against  national  bank,  when  failure  to  allow  deduction  for  realty 

is,  298. 
against  national  bank,  double  taxation  may  not  be,  298,  299. 
forbidden  by  Fourteenth  Amendment,  310,  311,  314. 
denial  to  railroad  alone  of  right  to   deduct  for  mortgages  on  realty 

is,  310,  455. 
deduction  for  corporate  realty  from  assessment  of  resident  stock- 
holders only  not,  403. 
general  principle  determining  when,  is  invalid  for  classification,  439' 
between  classes,  when  illegal.     See  Classification. 
in  f  wor  of  foreii^n  products  invalid,  458. 
by  overvaluation.     See  Valuation. 


832  .  INDEX. 

References  are  to  Sections.  » 

DISTRAINT, 

for  enforcement  of  tax  on  national  banks,  269,  300. 

consistent  witti  due  process  of  law,  331 . 
DISTRESS  WARRANT, 

for  collection  of  tax.     See  Due  Process  of  Law. 
DISTRICT  OF  COLUMBIA, 

plenary  taxing  power  of  Federal  government  over.     See  Federal, 
Taxing  Power. 

DIVIDEND, 

deflnitioQ  of  corporate,  70 
DOING  BUSINESS, 

wheth  ;r  corporation  is,  decided  by  State  court,  62. 

sending  goods  into  State  for  sale  is  not,  148. 

State  tax  for  privilege  of.     See  Foreign  Corporation. 

conditions  for,  174 

making  single  contract  is  not,  175. 

transaction  of  interstate  commerce  is  not,  175. 

mere  ownership  of  property  in  State  is  not,  176. 

holding  stock  in  domestic  company  is  not,  177,  178. 

whether  holding  interests  in  limited  partnerships,  178,  180. 

raaintainiug sales  agency  and  office  is,  179. 

maintaining  parapheraalia  of  pipe-line  is,  179. 

business  domicil  essential  to  constitute,  179,  181. 
DOMICIL, 

business,  essential  to  constitute  "  doing  business  "  Iq  State,  179, 181. 

definition  of,  in  Massachu-^elts  constitution,  414. 

definition  of,  by  Justice  Story,  414. 

definition  of,  by  Shaw,  C.  J.,  414. 

residence  and  habitaucy  in  State  tax  laws  synonymous  with,  414, 418. 

distinguished  from  residence  and  citizenship,  415,  418,  419. 

right  to  change,  416. 

burden  of  proof  is  on  person  claiming  to  have  changed,  416. 

motive  in  changing,  immaterial,  417. 

term  residence  employed  in  sense  of,  418. 

fact  and  intent  must  unite  to  create,  418,  419. 

due  process  of  law  requires  that  personal  taxation  shall  be  only  at, 
419. 

person  can  have  only  one,  419. 

personally  in  other  jurisdictions  generally  not  tixed  at,  420. 

personalty  located  elsewhere  in  same  State  taxable  at  owner's,  424. 

DOUBLE  TAXATION, 

of  coi'porations,  what  constitutes,  298,  404,  422. 

of  national  banks,  when  not  discrimination,  298,  299. 

evil  tendency  of,  404. 


INDEX.  833 

References  are  to  Sections. 

DOUBLE  TAXATION  — Continued, 

through  taxation  of  property  at  domicile  of  owner  and   at  actual 
situs,  414r. 

presumption  that  legislature  does  not  intend,  40G,  425. 

when  does  not  violate  requirement  of  due  process  of  law,  426. 

by  assessments  on  same  property  to  different  persons,  426. 

by  competing  State  authorities,  427. 

can  only  be  avoided  by  interstate  comity,  428. 

by  State  of  same  property  to  same  person,  428,  436. 

by  State  and  Federal  governments,  429. 

of  inheritances,  429,  430. 

by  levying  general  taxation  and  special  assessment  on  same  property, 
436. 
DRUMMER, 

from  other  States  not  subject  to  license  tax,  138,  139,  141,  142. 

delivery  of  goods  sold  by,  exempt  from  State  tax,  14G. 

what  constitutes,  152. 
DUE  PROCESS  OF  LAW, 

under  Fifth  and  Fourteenth  Amendments,  305,  312,  316,  357. 

when  not  denied,  by  erroneous  decision  of  State  court,  306. 

scope  of  guaranty  of,  311. 

requires  notice  and  hearing  in  special  assessments.     See  Special 
Assessments. 

when  legislative  regulation  of  charges  is  denial  of,  313. 

requires  public  purpose  for  taxation,  343.     See  Public  Purpose. 

required  in  tax  procedure,  313. 

requires  that  compensation  be  made  for  condemned  private  prop- 
erty, 316. 

is  the  law  of  the  land,  317. 

defined  by  Webster,  317. 

defined  by  Story,  317. 

defined  by  Supreme  Court  in  Hurtado  v.  California,  340. 

dots  not  require  judicial  hearing,  318,  335. 

summary  procedure  for  collection  of  tax  consistent  with,  818,  330, 
335,  376. 

to  be  construed  in  light  of  common  law,  318. 

distress  warrant  issued  by  U.  S.  Treasury  against  defaulting  col- 
lector is,  318. 

Justice  Miller  on  meaning  of,  in  tax  procedure,  318. 

requires  notice  and  hearing  in  taxation,  when.     See  Notice   and 
Hearing. 

does  not  require  rehearing,  323. 

does  not  require  review  by  certiorari,  323. 

does  not  require  retrial,  323. 

53 


834  INDEX. 

References  are  to  Sections. 

DUE  PROCESS  OF  LAW  — Continued. 

classification  for  summary  procedure  for  sale  of  property  consistent 

with,  330. 
distress  warrant  to  collect  delinquent  tax  consistent  with,  330,  331. 
seizure  of  person  for  collection  of  delinquent  tax  consistent  with, 

331. 
infliction  of  penalties  on  delinquents  consistent  with,  332. 
remedies  for    illegal    taxation    required   by.      See    Remedy    for 

Illegal  Taxation. 
when  retrospective  legislation  is    consistent  with.      See   Retro- 
spective Legislation. 
when  statutory  conclusiveness  of  tax  deeds  is.     See  Tax  Deed. 
essentials  only  considered  in  determining  whether  tax  procedure  is, 

338. 
what  defects  in  tax  procedure  amount  to  denial  of,  338. 
essentials  of,  distinguished  from  requirements  of  State  statute,  338. 
imposition  of  city  tax  on  annexed  farmlands  not  denial  of,  345. 
in  special  assessments,  under  5th  and  14th  Amendments,  357. 
legislative  discretion  subject  to  requirements  of.     See  Legislative 

Discretion. 
requiring  taxpayer  to  state  defenses  to  future  suit  on  tax  bill  is  not, 

381. 
requires  State  to  confine  taxation  to  jurisdiction,  391,  392.     See 

Jurisdiction  op  State. 
where  double  taxation  does  not  constitute  denial  of.     See  Double 

Taxation. 
required  that  taxing  power  be  exercised  by  legislature,  431. 
DUTY, 

meaning  of,  in  U.  S.  Constitution,  485. 

levy  of  custom,  consistent  with  requirement  of  uniformity,  492. 

levy  of,  under  war  power,  493. 

on  imports  from  and  exports  to  ceded  islands,  494. 

under  Foraker  Act,  495. 

position  of  territory  acquired  by  conquest  as  to  imposition  of.     See 

Territory. 
reciprocity  powers  as  to  levy  of  custom,  conferred  on  President  of 

United  States  valid,  499. 
jurisdiction  of  United  States  Circuit  Court  over  suits  arising  under 

act  imposing,  520. 

F 
EARNINGS, 

tax  on  gross.     See  Interstate  Carriers. 

tax  on  net.     See  Interstate  Carriers. 

tax  on  gross,  distinguished  from  tax  on  freight,  226,  229. 

capitalization  of,  distinguished  from  measuring  excise  by,  237. 


INDEX.  835 

References  are  to  Sections. 

EQUALITY  AND   UNIFORMITY  IN    STATE  CONSTITUTIONS.     See 
Constitution  of  State. 

EQUALIZATION,  BOARD  OF.     See  Board  of  Review. 
EQUAL  PROTECTION  OF  THE  LAWS, 

guaranteed  to  persons  in  jurisdictiou  only,  309. 

meaning  and  scope  of  guaranty  of^  311,  434,  435. 

requires  that  classification  for  taxation  be  reasonable,  313. 

in  regulation  of  charges,  313. 

guariniy  of,  directed  against  arbitrary  discrimination  in  taxation, 

436. 
ext  nds  Federal  protection  over  existing  rights,  436. 
requires  apportionment  of  tax  according  to  uniform  standard,  436, 

438,  443. 
requin  m  nt  of,  inherent  in  taxation,  436. 
permits  ad jusi  ment  of  tax  system  to  subjects  taxed,  437. 
requ  iremen  s  of,  as  to  legislative  classification.    See  Classification, 

438-442. 
does  not  require  iron  rule  of  equal  taxation,  439. 
does  not  prohibit  valuation  of  railroad  property  by  unit  rule,  441. 

See  Unit  Rule. 
right  of  appeal  from  decision  of  reviewing  board  not  essential  to, 

442. 
taxation  of  employers  of  foreign  born  males  is  denial  of,  457. 
requirement  of,  not  substitute  for  municipal  law,  449,  459. 
secures  equal  benefit  of  laws,  460. 
requires  equality  of  valuation,  463,  478. 
ESTATES  OF  DECEDENT, 

judgment  against  non  resident  executor  for  back  taxes  on,  333. 
personalty  of,  inherited  by  uon-resident,  subject  to  Stale  tax,  394, 

398. 
personalty  of,  who  was  non-resident,  subject  to  State  tax,  394,395. 
inheritance  of,  subject  to  double  taxation,  429. 
EXCEPTIONAL  CIRCUMSTANCES, 

requiring  deduction  under  unit  rule.     See  Unit  Rule. 
effect  of,  on  area  and  frontage  rule,  387,  389. 
EXCISE  TAX, 

defined,  232,  485. 

levied  on  interstate  carriers.     See  Interstate  Carriers. 

meaning  of,  in  Constitutional  grant  of  taxing  power  to  Congress, 

485. 
Stamp  tax  is,  485. 

tax  levied  by  Congress  on  manufactured  tobacco  is,  485,  496. 
tax  on  sales  made  at  commercial  exchanges  is,  485. 


836  INDEX. 

References  are  to  Sections. 

EXCISE  TAX  — Continued. 

•  inheritance  tax  is,  487. 
may  be  increased,  512. 
EXEMPTION  FROM  STATE  TAXATION, 

of  U.  S.  agencies.     See  State,  Taxing  Power  of. 
of  interstate  passengers.     See  Interstate  Commerce. 

of  property  of  U.  S.    See  Lands. 

of  Indian  Reservation.     See  Indian  Eeservations. 

grant  of^  is  contract,  40. 

contract  of,  not  implied,  41,  81,  86. 

contract  of,  validity  established,  42. 

contract  of,  strictly  construed  against  grantee,  43,  86,  87,  93,  94,  95. 

contract  of,  with  one  constituent  of  consolidated  corporation,  43,  92. 

contract  of,  charter  provision  in  lieu  of  all  taxes  sustained,  44. 

contract  of,  power  of  State  to  make,  44,  46,  47. 

contract  of,  enforced  as  to  property  acquired  after  constitutional 
repeal  of  power  to  exempt,  45,  46,  47. 

contract  of,  consideration  essential,  48,  82,  83. 

contract  of,  consideration  presumed,  46. 

contract  of,  consideration  need  not  be  mentioned  in  grant,  46. 

contract  of ,  possibility  of  abuse  of  exemption  does  not  affect  validity 
of,  46. 

contract  of,  extends  to  property  of  eleemosynary  corporation  held 
for  revenue,  48. 

contract  of,  what  constitutes,  67,  68,  69. 

contract  of,  conditional  exemptions,  69,  70,  93,  94. 

contract  of,  judgment  on  exempted  bond  exempted,  72. 

contract  of,  one  subject  of  corporate  taxation.     See  Corporations. 

governmental,  repealable,  76,  77. 

power  reserved  to  alter,  amend  or  repeal,  85. 

lost  by  change  of  corporate  business,  88. 

lost  by  repeal  before  incorporation,  89. 

does  not  extend  to  new  stock  issued  after  repeal,  89. 

Is  personal  immunity,  90. 

not  franchise,  91. 

does  not  extend  to  special  assessments,  96. 

of  native  products  held  not  substantial.discrimination,  149. 

constituting  discrimination  against  national  banks.     See  Discrimin- 
ation. 

constitutional  provision  forbidding,  limited  to  affirmative  exemp- 
tions) 431. 

constitutional  provision  forbidding,  violated  by  indirect  exemption, 
432. 

varying  policies  of  States  as  to,  439,  440. 


INDEX.  837 

References  are  to  Sections. 

EXEMPTION  FROM  STATE  TAXATION  —  Continued, 
for  purposes  of  classification.     See  Classlfication. 
incident  to  selection  of  subjects  for  taxation,  452. 
of  non-interest  bearing  bonds,  valid,  453. 

EXPORTS, 

term  restricted  to  subjects  of  foreign  commerce,  109,  110. 

duty  on,  what  constitutes,  111. 

intent  to  export  insufficient  to  exempt,  119,  120,  121, 122,  127,  496. 

inheritance  tax  on  aliens  not  tax  on,  125. 

license  tax  on  foreign  exchange  broker  not  tax  on,  12G. 

in  relation  to  State  taxing  power,  127. 

tax  on,  forbidden,  496. 

tax  on  tobacco  intended  for  exportation  valid,  496. 

tax  on  foreign  bill  of  lading  is  tax  on,  497. 
EXPRESS  COMPANY, 

valuation  of,  under  unit  rule.     See  Unit  Rule. 

property  of,  considered  as  unit  in  use,  for  purposes  of  valuation, 
262,  254,  255. 

F. 

FEDERAL   QUESTION, 

decision  of    State  tribunal  on  question  of  fact  does  not   present, 

172,  382. 
rulings  of  State  court  on  testimony  not  reviewed  by  Supreme  Court 

unless  bearing  on,  246. 
denial  to  railroad  alone  of  right  to  deduct  for  mortgage  on  realty 

raises,  310. 
when  decision  of  State  court  on,  is  conclusive,  314. 
method  followed  by  State  auditor  in  reassessing  personalty  not, 

333. 
doubtful  whether  misdescription  ia  tax  procedure  involves,  381. 
not  presented  by  fraudulent  decision  of  State  tax  tribunal  on  ques- 
tion of  fact,  382. 
whether  city  is  authorized  by  State  law  to  require  license  fee  is  not, 

412. 
determination  of  which  residence  is  the  domicil  does  not  raise,  419. 
inequality  of  valuation  as,  478. 
two  modes  of  procedure  to  obtain  judgment  of  Supreme  Court  on, 

519.     See  Supreme  Court. 
is  claim  of  right  or  exemption  under  U.  S.  Constitution  and  laws, 

519,  528. 
as  to  right  of  removal  to  U.  S.  Circuit  Court.     See  Jurisdiction  of 

U.  S.  C.  C. 
judicial  knowledge  no  aid  in  raising  issue  on,  522. 


838  INDEX. 

References  are  to  Sections. 

FEDERAL   QUESTION —Continued. 

illustrative  cases  of  what  is  not,  528. 

over  territories.     See  Territory.     • 

over  District  of  Columbia,  516. 

extends  to  selection  of  appropriate  means  of  collection,  517. 
FEDERAL  TAXING  POWER. 

granted  by  U.  S.  Constitution,  1,  479. 

distinguished  from  State  taxing  power  under  U.  S.  Constitution,  2. 

relation  of,  to  State  taxing  power.     See  State  Taxing  Power. 

express  limitations  upon,  4,  485. 

for  what  purposes  may  be  exercised,  480. 

Constitutional  limitations  on  purpose  of,  addressed  to  discretion  of 
Congress  480,  481. 

to  provide  for  "  general  welfare  of  the  United  States,"  481.     See 
United  States. 

extends  to  selection  of  means  for  attainment  of  express  objects,  481. 

diflSeult  for  courts  to  review  exercise  of,  480,  481,  482. 

use  of,  to  tax  out  of  existence,  480. 

to  pay  debts  of  U.  S.,  483,  484.     See  United  States. 

may  be  exercised  in  what  forms  of  taxation,  485.    See  Tax. 

coextensive  with  territory  of  U.  S.,  490. 

to  levy  direct  tax.    See  Direct  Tax. 

as  to  uniformity  required  in  indirect  taxation  levied  under.    See  Uni- 
formity. 

to  levy  duties.     See  Duty. 

exports  not  subject  to.     See  Exports. 

imports  from  one  State  to  another  not  subject  to,  498. 

not  subordinate  to  treaty  power,  500. 

State  agencies  and  instrumentalities  exempt  from,  501. 

salary  of  State  judicial  oflacers  exempt  from,  501. 

bond  of  notary  public  exempt  from,  501. 

over  agencies  of  municipality.     See  Municipality. 

over  inheritances.     See  Inheritance  Tax. 

in  relation  to  State  authority,  504,  510. 

franchise  granted  by  State  subject  to,  505. 

justifies  tax  on  bank  for  paying  out  municipal  notes,  505. 

license  imposed  under,  gives  no  rights  against  State  police  power,  506. 

diminution  of  salaries  by  exercise  of,  508. 

extends  to  tax  on  sales  made  on  boards  of  trade,  510. 

to  be  exercised  with  direct  reference  to  existing  trade  conditions,  510. 

over  foreign  and  over  interstate  commerce  compared,  511. 

over  interstate  commerce.     See  Interstate  Commerce. 

extends  to  property  of  non-resident  aliens,  613. 

extends  to  property  of  residents  invested  abroad,  514. 


INDEX.  839 

References  are  to  Sections. 

FERRIES, 

power  of  State  to  establish  and  license,  195,  196. 
intra-state  distinguished  frora  interstate,  195. 
property  employed  in,  taxable,  195. 
license-tax  on  interstate,  sustained,  195. 
situs  of,  for  taxation,  196. 

FOREIGN  CORPORATION, 

rights  of,  interstate  commerce,  157,  158. 

does  business  in  State  only  through  comity  thereof,  158,  406. 

State   may  discriminate   in  conditions  for  admission   of,   159,  161, 

163,  164,  167. 
license  tax  on   foreign  insurance  companies  for  doing  business, 

160. 
not  admitted  into  State  by  force  of  U.  S.  treaty,  162. 
State  can  change  conditions  for  admission  of,  163,  164. 
plenary  discretion   of  State  as  to    conditions    for    admission    of, 

165,  166,  167,  172. 
power  to  discriminate  limited  to  conditions  for  admission  of,  168. 
admission  of,  analogous  to  grant  of  corporate  franchise,  168. 
entitled  to  equal  protection  of  laws,  168,  169. 
unconstitutional  condition  for  admission  of,  169. 
limitations  of   State  power    as  to  admission  of,   why  ineffectual, 

169. 
tax  on  corporate  franchise  of.    See  Corporate  Franchise. 
tax  on  capital  of,  employed  in  State,  172. 
discrimination  favoring  State  manufactures  in  tax  on,  173. 
"does  business 'Mn  State,  when.     See  Doing  Business. 
in  service  of  U.  S.  not  subject  to  conditions  for  admission,  158,  182. 
furnishing  channels  of  interstate  commerce   not  subject  to  condi- 
tions for  admission,  158,  183. 
furnishing  channels  of  interstate  commerce  subject  to  State  charges 

for  consolidation,  184. 
Fourteenth  Amendment  does  not  prohibit  State  from  excluding,  308. 
FOURTEENTH  AMENDMENT, 

the  child  of  Rt  construction,  302. 

immediate  purpose  of,  302,  303,  311. 

restraint  upon  State  power,  302. 

protects  privileges  aud  immunities  of  citizens  of  U.  S.,  not  State, 

303,304. 
restricted  to  protection  of  enfranchised  race,  303. 
scope  of  guaranties  in,  not  at  once  recognized,  302,  303,  304. 
■what  are  privileges  and  immunities  protected  by,  304. 
all  property -rights  protected  by  guaranties  in,  305. 


840  INDEX. 

References  are  to  Sections^ 

FOURTEENTH  AMENDMENT  — Contiaued. 

importance  of  guaranties  in,  305,  311. 

applies  to  State,  not  individual,  action,  306. 

protects  against  agencies  of  State,  306. 
•         applies  to  all  instrumentalities  of  State,  306,  315. 

guaranties  of,  protect  all  persons  in  jurisdiction,  307,  311. 

corporations  are  persons  under,  308. 

does  not  proliibit  State  from  excluding  foreign  corporations,  308. 

*'any    person"   and   "any  person  within  llie    jurisdiction"    dis. 
tinguished,  309. 

guarantees  due  process  of  law.     See  Due  Process  of  Law, 

guarintees  equal  protection  of  the  laws.     See  Equal  Protection  of 
THE  Laws. 

applied  to  taxation,  310. 

enforced  by  Act  of  Congress,  310. 

forbids  discrimination  in  taxation,  310,311,  314. 

effect  of,  upon  State  power  to  exempt  from  taxation,  311. 

requires  that  property  tax  be  levied  by  common  ratio  to  value,  311. 

•'  due  process  of  law"  distinguished  from  "  equal  protection  of  the 
laws,"  313. 

enforced  in  State  courts,  314. 
.  requires  substantial  compliance  with  guaranties,  315. 

application  to  condemnation  proceedings,  316. 

forfeiture  of  lands  for  taxes  consistent  with,  335. 
FRANCHISE, 

corporate.     See  Corporate  Franchise. 

granted  by  U.  S.  not  taxable  by  State,  29,  30. 

definition  of,  30,  91. 

granted  by  State  taxable  by  State,  31. 

of  railroad  is  property.     See  Railroads. 

distinguished  from  "rights,  privileges  and  immunities,"  91. 

of  national  banli  not  subject  to  State  tax,  268. 

granted  by  State  subject  to  State  tax,  505. 
FRONTAGE   RULE, 

in  special  assessments.     See  Area  and  Frontage  Rules. 

G. 

GENERAL  WELFARE, 

of  the  U.  S.,  what  is.    See  United  States. 
GRANT, 

legislative,  when  contract,  39,  67,  82. 

H. 

HABEAS  CORPUS, 

Federal  court  will  release  party  confined  for  non-payment  of  illegal 
tax,  by,  534. 


INDEX.  841 

References  are  to  Sections. 

HABEAS  CORPUS  —  Continued. 

cannot  be  used  to  perform  functions  of  writ  of  error  or  appeal,  534. 
permissible  to  release  State's  prisoner  only  in  urgent  cases,  534. 
HEARING, 

and  notice  when  required.     See  Notice  and  Hearing. 

legislative  discretion  as  to  tribunal  before  which,  may  be  had,  319, 

323. 
one  sufficient,  satisfies  requirement  of  due  process  of  law,  323. 
opportunity  for,  at  any  stage  of  proceedings  sufficient,  329,  333,  381. 
in  suit  to  collect  tax,  when  sufficient,  329,  333. 
as  to  erroneous,  as  well  as  illegal,  assessments  necossary,  329, 
in  suit  to  enjoin  collection  of  t\x  held  sufficient,  329. 
in  review  by  certiorari,  when  sufficient.     See  Certiorari. 
need  not  be  secured  before  assessment  or  collection  of  tax,  335. 
excluded  by  legislative  apportionment  in  special  assessments,  377. 
when  required  before  Including  property  in  benefited  district,  377, 

378. 
HOME  PORT, 

of  vessels.     See  Situs  for  Taxation. 

I. 

IMPORTS, 

tax  on  importer  is  tax  on,  102. 

meaning  of  import,  102. 

right  to  import  includes  right  to  sell,  102. 

are  subjects  of  foreign,  not  intei'state,  commerce,  109,  110. 

in  relation  to  State  taxing  power,  127. 

duty  on.     See  Duty. 
INDEPENDENT  JUDGMENT, 

of  Supreme  Court  as  to  existence  of  contract.     See  Contract. 

on  questions  of  general  jurisprudence,  548. 
INHERITANCE  TAX, 

incidence  of,  34. 

bequests  to  U.  S.  subject  to,  34. 

U.  S.  securities  subject  to  State,  35. 

not  rendered  illegal  by  U.  S.  treaty,  36. 

law  imposing,  not  contract,  75. 

on  aliens  not  tax  on  exports,  125. 

requires  notice  and  hearing  as  to  valuation  of  estate,  322. 

may  be  imposed  on  succession  to  property  in  other  jurisdictions, 
429,  430. 

classification  in  levy  of.    See  Classification. 

final  incidence  of,  451. 

distinguished  from  property  tax,  451. 


842  INDEX. 

References  are  to  Sections. 

INHERITANCE  TAX —  Continued, 
is  not  "  direct  "  tax,  487. 

is  consistent  with  requirement  of  geographical  uniformity,  491. 
State  securities  subject  to  Federal,  502. 
Federal  securities  subject  to  Federal,  503. 

Federal,  does  not  infringe  State  power  to  regulate  inheritance,  504. 
progressive  feature  of,  sustained,  509. 
INJUNCTION, 

to    restrain    collection   of  special   assessment,   misdescription    as 

ground  for,  381. 
extends  to  whole  of  illegal  assessment,  383. 
when  issues  to  restrain  discrimination   by  relative  overvaluation, 

473,  474,  476. 
restrains  only  excess  over  uniform  assessment,  474. 
restrains  whole  of  fraudulent  assessment,  774. 
und^r  Federal  statute,  530,  544. 
under  Federal  statute  not  granted  o  i  ground  of  unconstitutionality 

merely,  530. 
under  Federal  statute,  issues  against  State  courts  only  in  bankruptcy 

cases,  530. 
under  Federal  statute,  does  not  lie  to  restrain  collection  of  Federal 

taxes,  630,  551. 
under  Federal  statute  only  issues  when  party  shows  lack  of  adequate 

legal  remedy,  531. 
under  Federal  statute,  court  recognizes  existence  of  adequate  legal 

remedj  sua  sponte,  531. 
under  Federal  statute  does  not  issue  to  enjoin  tax  paid  under  pro- 
test, 531. 
only  proper  remedy  where   prompt  claim  for  deduction  of  debts  is 

essential,  532. 
only  proper  remedy  to  enforce  objections  to  making  of  public  im- 
provements, 532. 
only  proper  remedy  for  seizure  of  property   under  illegal  license 

taxation,  532. 
only  proper  remedy  to  prevent  multiplicity  of  suits  against  same 

defendant,  532. 
demanded  often  by  public  policy,  532,  538,  553. 
by  stockholder    to    restrain    corporation    from  paying  illegal  tax, 

533,  549. 
out  of  Federal  courts,  granted  against  excessive  tax  only  in  payment 

of  amount  due,  535. 
out  of  Federal  courts,  plaintiff  must  show  in  bill  what  part  of  tax 

is  illegal,  535. 
out  of  Federal  courts,  requisites  of  valid  tender,  535. 


INDEX.  843 

References  are  to  Sections. 

INJUNCTION  —  Continued. 

out  of  Federal  courts,  tender  not  required  where  whole  tax  is  com- 
plained of,  535. 

out  of  Federal  courts,  bill  for,  not  dismissed  after  insufficient  tender 
in  good  faith,  535. 

out  of  Federal   courts,  when  application   to  State  tribunals   must 
precede  bill  for,  536. 

out  of  Federal  courts,  granted  where  State  procedure  is  not  open  to 
plaintiff,  536. 

out  of  Federal  courts.  State   statutory  remedy  does  not  oust  juris- 
diction to  issue,  537. 

out  of   Federal  courts.  State  statutory  remedy  may  be  adequate  at 
law,  537. 

out  of  Federal  courts,  where  State  provides  for  injanctlon  against 
illegal  tax,  537,  553. 

out  of  Federal  courts,  issues  to  restrain  execution  of  unconstitu- 
tional State  statute,  540,  552. 

out  of  Federal  courts,  issues  to  restrain  illegal  administration  of 
valid  State  statute,  640,  552. 

out  of  Federal  courts,  issues  to  restrain  State  officers  from  seizing 
property  in  hands  of  court's  receiver  for  State  taxes,  541. 

out  of  Federal  courts,  will  not  lie  to  compel  levy   of  tax    to  pay 
municipal  bonds,  544. 

out  of  Federal  courts,  issues  to  restrain  collection  of   Federal  tax 
adjudged  invalid,  551. 

is  proper  remedy  for  invalid  tax,  563. 

superiority  of,  as  remedy  over  action  at  law,  553. 
INDIAN  RESERVATIONS, 

exempt  from  State  taxation,  26. 

when  exemption  ceases,  26. 

exemption  inconsistent  with  treaty,  26. 

cattle,  of  non- Indians  on  Indian  Reservations  taxable,  27. 

right  of  way  of  railroad  through  Indian  Reservation  taxable,  27. 

stock  of  Indian  post-trader  taxable,  27. 
INSPECTION  LAWS, 

power  of  State  to  enact,  129,  204. 

authorizing  excessive  charge,  129. 

scope  of,  129. 

when  valid,  129, 199,  204. 

quarantine  and  pilotage  charges  sustained,  204. 
INSURANCE, 

Is  not  interstate  commerce,  147,  160,  183. 

company,  stock  of  is  not  "other  moneyed  capital,"  284. 

company,  classification  between  foreign  and  resident  valid,  459. 


844  INDEX. 

References  are  to  Sections. 

INTERSTATE  CARRIERS, 

license  tax  on.     See  License  Tax. 

State  tax  on  property  of,  within  State  valid,  208,  215,  238,  254. 

State  tax  on  interstate  telegrapti  messages  void,  216. 

State  tax  on  rolling  stocls  by  rule  of  average  in  habitual  use,  220, 
221,  222,  223. 

State  tax  on  refrigerator  cars  by  rule  of  average  In  habitual  use,  223. 

State  tax  on  interstate  freight  void,  225. 

State  tax  on  railway  gross  receipts  valid,  226. 

taxable  by  rule  of  mileage  apportionment.     See  Mileage  Appor- 
tionment. 

State  tax  on  net  earnings  of,  sustained,  228,  236. 

State  tax  on  gross  receipts  of  interstate  properties  void,  229,  230. 

Excise  tax  on  State's  proportion  of  gross  earnings  valid,  231,  232, 
233. 

tolls  for  use  of  railroad  in  State  taxable  by  State,  233. 

gross  receipts,  not  subject,  but  measure  of  tax  on,  235. 

taxation  of  by  unit  rule.     See  Unit  Rule. 
INTERSTATE  COMMERCE, 

interstate  passengers  exempt  from  State  tax,  20. 

original  package  in.     See  Original  Package. 

regulation  of,  during  noa-actioa  of  Congress,  105,  106. 

tax  on  shipments  of,  must  be  without  discrimina  ion,  112,  113. 

tax  on  shipments  of,  consistent  with  freedom  of,  113. 

property  in  commercial  transit  through  Stale  exempt  from  tax,  120. 

State  inspection  laws  in  relation  to,  129. 

police  power  of  State  in  relation  to.     See  Police  Power. 

regulation  of,   through  discriminating  taxation.     Sie  Discrimina- 
tion. 

taxation  of  drummers  from  other  States.     See  Drummers. 

not  taxable  by  States  even  without  discrimination,  liO. 

license  tax  on  commercial  brokers.     See  Commercial  Brokers. 

business  for  non-residents  only  exempt,  when,  147. 

what  constitutes,  147,  148,  152,  160,  190,  198. 

sale  of  goods  already  in  State  is  not,  148,  152. 

distribution  of  goods  consigned  to  fill  orders  exempt,  148. 

license  tax  on  peddlers,  not  regulation  of.     See  Peddler. 

foreign  corporations  in.     See  Foreign  Corporation. 

furnishing  channels  for,  distinguished  from  making  interstate  sales, 
184. 

vessels  in.     See  Vessels. 

bridges  in.     See  Bridges. 

taxation  of  interstate  carriers.     See  Interstate  Carriers. 

bonus  reserved  in  railroad  charter  is  not  regulation  of,  218. 


INDEX.  845 

References  are  to  Sections. 

INTERSTATE  COMMERCE  —  Continued. 

power  of  Congress  to  regulate,  distinct  from  Federal  taxing  power, 

511. 
Congress  not  restrained  by  U.  S.  Constitution  from  interfering  with, 

511. 
shipments  of,  whether  subject  to  Federal  tax,  511. 
tax  on  property  employed  in,  when  would  be  direct  tax,  511. 
Congress  may  levy  indirect  taxes  on  facilities  of,  511. 

J. 

JURISDICTION, 

where  depends  upon  party,  it  is  p^irty  to  record,  540. 

defined,  542. 

objections  to,  distinguished  trora  defenses  to  merits,  542. 

JURISDICTION  OF  STATE, 

taxation  of  foreign-heid  securities  is  beyond,  71,  399, 

municipal  tax  on  municipal  bonds  of  non-residents  is  beyond,  72. 

tax  on  judgment  heid  by  non  resident  on  exempted  bonds  is  be- 
yond, 72. 

tax  on  corporate  franchise  of  foreign  corporation  may  be  tax  on 
property  beyond,  166,  167,  406. 

personal  judgment  on  special  tax  bill  against  non-resident  is  be- 
yond, 360. 

State  taxing  power  restricted  by  due  process  to,  391,  392. 

subjects  of,  enumerated,  391. 

plenary  power  of  State  over  subjects  within,  391. 

State  taxing  power  limited  to,  by  general  principles  of  constitutional 
law,  392. 

extends  to  all  movables  and  immovables  in  confines,  393. 

not  affected  by  maxim  mohilia  seguuntur  personam,  393,  394,  395. 

extends  to  money  and  securities  in  its  confines  of  non-resident 
owners,  394,  395,  397. 

extends  to  mortgages  of  residents  on  extra-State  realty,  394. 

extends  to  personalty  in  hands  of  resident  agents,  394,  395. 

securities  regarded  in  taxation  as  tangible  chattels  for  purposes  of, 
395. 

when  property  is  within,  395,  420,  429. 

presence  of  resident  agent  not  essential  to,  396. 

immaterial  as  to,  whether  obligation  was  executed  by  resident  or 
non-resident,  396. 

debts  owned  by  residents  to  non-residents  not  within,  397. 

credits  subject  to,  must  be  evidenced  in  tangible  form,  397. 

credits  subject  to,  must  be  localized  for  permanent  use,  397. 

enforcement  of  tax  against  non-resident  owners  of  property  within, 
398. 


846  INDEX. 

Refereuces  are  to  Sections. 

JURISDICTION  OF  STATE  — Continued. 

requirement  that  corporation  deduct  tax  from  interest  on  bonds 

witliin,  valid,  399. 
requirement  tliat  railroad  at  oflace  beyond,  deduct  tax  from  interest 

paid  residents  void,  400. 
does  not  extend  to  public  stock  when  owner  is  domiciled  elsewhere, 

400. 
mortgage- interest  wherever  held  in  realty  within,  subject  to  State 

taxation,  401,  402. 
extends  to  stock  of  domestic  corporation  held  by  non-residents,  403. 
non-resident  stockholder  in  corporation  within,  not  subject  to  tax  in 

absence  of  statute,  404. 
unit  and  mileage  rule  in  relation  to,  252,  258,  405.     See  Unit  and 

Mileage  Rule. 
extends  to  property  therein  in  hands  of  receivers,  trustees,  etc.,  407. 
over  property  for  taxation  summarized,  408, 
over  business  for  taxation,  409,  413. 
extends  to  partnership  business  localized  therein,  409. 
in  taxation  of  persons,  414. 

in  taxation  of  persons  depends  upon  domicil.     SeeDoMiciL,  414. 
extends  to  taxation  of  extra-territorial  personalty  of  resident,  414. 
extends  to  taxation  of    bonds  of  resident  secured  by  mortgage  on 

foreign  realty,  421. 
extends  to  taxation  of  resident  stockholders  in  foreign  corporation, 

422. 
extends  to  taxation  of  State  securities  of  other  States,  423. 
personalty  elsewhere  within,  taxable  at  owner's  domicil,  424. 

JURISDICTION  OF  U.  S.  CIRCUIT  COURT, 

pioceedson  ground  of  adverse  citizenship  or  Federal  claim,  519. 
See  Federal  Question. 

oiher  questions  may  be  determined,  519. 

what  amount  in  controversy  is  necessary  to,  520. 

essential  to,  that  excess  of  tax  complained  of  should  reach  jurisdic- 
tional amount,  520. 

assessments  cannot  be  lumped  to  reach  amount  essential  to,  520. 

extends  to  all  suits  arising  under  act  imposing  tax  on  imports  and 
tonnage,  520. 

not  necessary  to,  to  allege  how  State  would  parcel  out  illegal  taxes, 
520. 

when  necessary  to.  Federal  question  must  be  distinctly  pleaded,  521. 

when  necessary  to.  Federal  question  must  be  positively  pleaded,  521. 

depending  on  adverse  citizenship,  advantage  of  pleading  Federal 
claim,  521. 


INDEX.  847 

References  are  to  Sections. 

JURISDICTION  OF  U.  S.  CIRCUIT  COURT  — Continued. 

essential  to  on  removal,   that  Federal  claim  appear  by   plaintiff's 

petition,  522. 
essential  to  on  removal,  that  Circuit  Court  might  have  exercised 

original  jurisdiction,  522. 
suggestion    by   plaintiff  that  defendant  will  set  up  Federal  claim, 

insufficient  for,  522. 
■when  plaintifE  pleads  Federal  claim  insufficiently,  for  remedy  of 

defendant,  522. 
concurrent  with  State  courts,  when,  526,  547. 
extends  to  construction  of  State  constitution  and  statutes,  526. 
to  enjoin  collection  of  tax.     See  Injunction. 
defenses  to  merit  distinguished  from  objections  to,  542. 
question  of  plaintiff's  authority  to  maintain  bill  distinguished  from 

question  of,  542. 

L. 

LANDS, 

of  U.  S.,  exempt  from  State  taxation,  21. 
of  U.  S.,  when  exemption  ceases,  21,  22,  23,  24. 
of  U.  S.,  limitation  of  exemption  in  grant,  22. 
of  U.  S.,  when  State  holds  as  trustee,  23. 

of  U.  S.,  title  of  grantee  of  U.  S.  essential  for  State  taxation,  21,  24. 
of  U.  S.,  ores  from  taxable,  25. 

forfeiture  of,  for  taxes  consistent  with  due  process  of  law,  835. 
LAW, 

contract  only  impaired  by,  65. 

includes  municipal  ordinance,  when,  66. 

when  impairs  obligation  of  contract,  71,  78. 

governmental  distinguished  from  contractual,  75,  76,  77,  78,  79. 

limiting  time  for  enforcing  vested  rights.     See  Limitation  Statute. 

Supreme  Court  not  concluded  by  title  as  to  purpose  of,  155. 

void  in  part,  whether  void  in  toto,  156,  386,  432,  482. 

of  the  situs,  personalty  subject  to  taxation  under,  221. 

equivalency  in,  distinguished  from  equivalency  in  fact,  268. 

what  constitutes,  341. 

what  determines  whether  object  of  is  public  purpose,  341,  346. 

imposing  tax  may  describe   subjects  of  taxation  in  general  terms, 

432. 
constitutionality  of,  is  for  judicial  not  executive  determination,  433. 
when  practical  construction  of,  is  to  be  relied  on,  497. 
unconstitutional  statute  is  no,  539,  552. 
local,  what  is,  547,  548. 

local,  when  administered  in  Federal  courts,  547. 
local,  distinguished  from  general  law,  548. 


848  INDEX. 

References  are  to  Sections. 
LAW  —  Continued- 

local,  Federal  courts  follow  State  courts  on  questions  of,  548. 
general,  Supreme  Court  exercises  independent  judgment  on  ques- 
tions of,  548. 
remedies   appropriate    to    construction    and    to    determination  of 

validity  of,  distinguished,  553. 
LEGAL  TENDER  NOTES, 

subjected  to  State  taxation,  II. 
State  may  require  taxes  to  be  paid  in  coin,  38. 
LEGISLATIVE  DISCRETION, 
to  revoiie  tax,  bow  limited,  73. 

as  to  notice  and  hearing.     See  Hearing  and  Notice. 
to  provide  classiflcation.    See  Classification. 
in  assessment  and  reassessment,  333. 

general  limitations  upon,  declared  in  Loan  Assn.  v.  Topeka,  341. 
how  limited  by  requirement  of  public  purpose,  341,  342. 
requirement  that    public   purpose  apply   to    whole    district  taxed 

addressed  to,  354,  480. 
in  special  assessments,  conclusive  as  to  need  for    improvement, 

358,372. 
in  special  assessments,    conclusive  as  to    proportion    of  cost  to 

be  borne  by  public,  358,  361,  372. 
in    special    assessments,  conclusive   as  to    boundaries    of    taxing 

district,  358,  368,  377. 
in  special  assessments.  Supreme  Court  on,  358. 

in  special  assessments,  to  form  taxing  district  of  municipalities,  359. 
in  special  assessments,  when  subject  to  judicial  review,  359,  362. 
in  special   assessments,    must    be    exercised  in    accord  with    due 

process,  359. 
in  special  assessments,  limited  to  jurisdiction,  360. 
in  special  assessments,   conclusive  on  question  of  benefit,  361,  362, 

372. 
in  special  assessments,  to  apportion  expense  on  ad  valorem  basis,  362. 
in  special   assessments,    conclusive  as  to    basis  for  apportioning 

expense,  364,  368,  371, 372. 
in   special  assessments,  presumption  that  exercise  of,  as  to  basis  of 

apportionment,  was  based  on  calculation  of  special  benefits.     See 

Special  Benefits. 
in  special  assessments,  how  limited,  369,  383,  388,  389. 
in  special  assessments.  Supreme  Court  reluctant  to  disturb  exercise 

of,  370. 
in  special  assessments,  in  what  particulars  may  be  delegated,  372, 

431. 
in  special  assessments,  summary  of,  388. 
levy  of  taxis  matter  for,  431. 


INDEX.  849 

References  are  to  Sections. 

LEGISLATIVE  DISCRETION  —  Continued. 

selection  of  subjects  of  taxation  is  matter  for,  431. 

constitutional  provision  requiring  affirmative  legislative    action  is 

addressed  to,  431.     See  Law. 
to  exempt  from  taxation,  452. 
limitation  of  purposes  for  which  Congress  may  levy  taxes  addressed 

to,  480. 
as  to  purposes  for  which  Congress  may  appropriate  public  money, 
481,  484. 
LICENSE  TAX, 

on  importer  is  tax  on  imports,  102. 

on  importer  also  regulation  of  commerce,  104. 

on  foreign-exchange  broker,  126. 

on  business  of  buying  and  selling  for  exportation  valid,  127. 

on  drummers  from  another  State  not  subject  to.    See  Dhummer. 

when  commercial  brokers  are  subject  to.    See  Commercial  Brokers. 

on  peddlers.    See  Peddlers. 

imposed  under  police  power.    See  Police  Power. 

imposed  on  foreign  corporations.     See  Foreign  Corporations. 

on  vessels  for  navigating  public  waters.     See  Vessel. 

on  ferry  sustained,  196. 

relation  to  ad  valorem  tax,  206. 

applied  to  interstate  commerce,  206,  207. 

on  interstate  carrier  without  discrimination  sustained,  207. 

on  interstate  carrier  invalid  as  regulation  of  commerce,  208. 

on  agent  of  interstate  railroad  invalid,  209. 

on  interstate  carrier  for  maintenance  of  office  invalid,  209. 

on  interstate  carrier  invalid  though  imposed  under  police  power,  210. 

on  interstate  carrier  for  transacting  local  business  valid,  211,  212. 

decision  of  State  court  limiting  to  local  business  conclusive,  212. 

must  clearly  appear  to  be  on  local  business  of  carrier  only,  213. 

exceeding  property  tax  on  interstate  carrier  invalid,  213. 

invalid,  when  amount  is  determined  by  length  of  railroad  beyond 

State,  213. 
must  not  be  condition  for  transacting  interstate  business,  214. 
not  exceeding  tax  on  property  in  use  valid,  215. 
on  interstate  operation  of  sleeping  cars  invalid,  217. 
rental  for  occupation  of  streets  by  telegraph  poles  not,  218. 
on  rolling  stock  an  interference  with  commerce,  220. 
on  national  bank  void,  267. 

notice  and  hearing  not  necessary  to  valid  levy  of,  319. 
on  emigrant  agent  sustained,  410. 
plenary  power  of  State  to  levy,  411,  412. 
limitations  on  power  of  State  to  levy,  413. 

54 


850  INDEX.' 

References  are  to  Sections. 

LICENSE  TAX  — Continued. 

classification  for  levy  of.     See  Classification. 

final  incidence  of,  450. 

distinguished  from  property  tax,  451. 

payment  of  Federal,  obtains  no  immunity  from  State  police  power, 
506. 

Federal,  on  municipality  engaging  in  liquor  business  valid,  507. 
LIMITATION  STATUTE, 

relation  to  vested  rigbts,  79. 

cannot  bar  assertion  of  jurisdictional  defect  in  tax  proceedings,  335. 

power  of  State  to  enact,  as  to  tax  titles,  339. 

protecting  tax  title,  what  constitutes  valid,  339. 

barring  suit  to  set  aside  tax  sale  void  on  its  face,  invalid,  339. 
LOCAL  LAW.     See  Law. 

M. 

MANDAMUS, 

lies  to  compel  performance  of  ministerial  act  by  State  official,  539. 

lies  to  compel  levy  of  tax  to  pay  municipal  bonds,  544,  545. 

must  be  based  on  statute  authorizing  tax  to  pay  municipal  bonds, 
544,  546. 

when  ineffectual,  is  not  therefore  inadequate  remedy  at  law,  544. 

right  to,  not  impaired  because  property  is  pledged  for  payment  of 
municipal  bonds,  545. 

does  not  lie  where  municipal  taxing  power  was  limited  by  statute 
when  bonds  were  issued,  545. 

power  of  Federal  court  to  issue,  546. 
MANUFACTURING  CORPORATION, 

stock  of,  not  "  other  moneyed  capital,"  282. 

specification  of,  on  classification  of  taxation,  459. 
MARKET  VALUE, 

as  indicating  value  of  corporate  capital  stoclj,  240,  252,453,  476. 

stock  market  quotations  as  evidence  of  value,  262. 
MILEAGE  APPORTIONMENT, 

rule  of,  used  in  calculation  of  average  In  habitual  use,  224. 

rule  of,  in  taxation  of  interstate  carriers,  227,  228. 

in  connection  with  unit  rule.     See  Unit  Rule. 
MINING  CORPORATION, 

stock  of,  not  "  other  moneyed  capital,"  281,  282,  283. 
MORTGAGE, 

equal  protection  of  laws  in  taxation  of,  310,  314,  455. 

of  non-resident  in  State  jurisdiction  subject  to  State  taxation,  394. 

on  realty  within  State  held  by  non-resident  subject  to  State  taxa- 
ation,  401,  402. 

on  foreign  realty,  bonds  secured  by,  taxable  at  holder's  domicil,  421. 


INDEX.  851 

References  are  to  Sections. 
MUNICIPALITY, 

ordinance  of,  may  impair  contract,  66. 

authority  of,  to  issue  bonds  Includes  power  to  tax  for  payment,  73, 
545. 

charter  of,  not  contract,  76,  77 

property  of,  governmental  and  proprietary,  77. 

relation  of  State  to,  and  to  individual  distinguished,  78. 

bonds  of,  are  "  other  moneyed  capital,"  285. 

bonds  of,  when  invalid  for  want  of  public  purpose,  342. 

may  impose  city  tax  on  annexed  farming  lands,  345,  359. 

what  is  public  purpose  in  taxation  by.  See  Public  Purpose  in  Tax- 
ation. 

sovereign  power  of  State  over,  359. 

difficulties  attending  special  assessments  in,  363. 

basis  of  apportionment  for  special  assessments  may  be  fixed  in  char- 
ter of,  365. 

basis  of  apportionment  made  on  theory  of  equal  distribution  of  ben- 
efits, 365. 

merits  and  evils  of  fixing  basis  of  apportionment  in  charter  of,  365, 
377. 

bonds  of,  valid  though  assessment  to  pay  them  is  void,  386. 

bonds  of,  when  judgment  on  can  be  collected,  assessment  being  void, 
S86. 

bonds  of,  exempt  from  Federal  taxation,  501. 

revenue  of,  from  railroad  bonds  exempt  from,  501. 

bank  may  be  subjected  to  Federal  tax  for  paying  out  notes  of,  505. 

engaging  in  liquor  business  subject  to  Federal  license  tax,  507. 

is  merely  State  agency,  516. 

proper  remedy  to  enforce  payment  of  bonds  of.  See  Mandamus, 
544,  545. 

N. 

NATIONAL  BANK, 

State  taxing  power  over,  dependent  on  permission  of  Congress,  264. 
Acts  of  Congress  authorizing  States  to  tax,  264,  265. 
Act  of  Congress  concerning  place  of  assessment  of,  263. 
State  tax  on,  must  conform  to  permissive  legislation,  266. 
State  taxation  of,  method  allowed  by  Acts  of  Congress  exclusive,  267. 
State  tax  on  president  of,  invalid,  2G7. 
State  tax  on  personalty  of,  invalid,  267. 
State  tax  on  realty  of,  authorized  by  Act  of  Congress,  267. 
State  tax  on  franchise  of,  void,  268. 

State  may  require  to  pay  tax  in  solido  for  shareholders,  269. 
State  may  enforce    payment    by,    for    shareholders,   by  distraint, 
269,  300. 


852  INDEX. 

References  are  to  Sections. 

NATIONAL  BANK  — Continued. 

tax  on,  as  agent  of  shareholders  distinguished  from  tax  on  bank  as 
such, 269. 

discrimination  against.     See  Discrimination. 

State  may  determine  where  shares  of  residents  are  taxable,  270. 

shares  of  non-residents  taxable  only  at  location  of  bank,  270. 

State  may  determine  manner  of  taxing  shares  in,  271. 

shares  in,  taxable  like  other  similar  personalty,  271. 

valuation  of  shares  in,  271. 

State  bank  changing  into,  taxable  by  State,  271. 

when  new  shares  In,  become  taxable  by  State,  271. 

shares  in,  owned  by  national  bank  Included  in  valuation  of  shares, 
271. 

shares  in,  distinguished  from  money  at  interest,  271. 

immaterial  that  capital  of  is  invested  in  exempt  property,  271,  274. 

immaterial  that  bank  holds  stock  of  foreign  corporation,  271. 

deduction  for  value  of  realty  iu  other   States  not  required,  272, 
298,  299. 

territories  have  same  taxing  power  over  as  States,  273. 

shares  in  are  "  moneyed  capital,"  276. 

may  sue  to  enjoin  tax  unlawfully  assessed  upon  shareholders,  286. 

realty  of,  exempted  by  State  laws,  298. 

double  taxation  of,  through  taxation  of  realty  in  other  States,  299. 

State  may  employ  usual  methods  in  enforcing  tax  on,  300,  331. 

visitorial  power  of  State  over,  301. 
NOTES, 

of  U.  S.    See  Legal  Tender  Notes. 

issued  by  State  in  aid  of  secession  void,  51. 
NOTICE, 

legislative  discretion  as  to  kind  of,  321. 

legislative  discretion  as  to  mode  of  giving,  321. 

of  fixed  public  sessions  of  revision   boards  need   not  be  personal, 
319,  325,  327. 

special,  of  adjourned  meeting  of  revision  board  not  required,  325. 

of  special  assessment  must  be  specific,  327,  376. 

of  special  assessment  may  be  by  publication,  327. 

by  publication,  e-isentials  of,  328. 

and  hearing  wheu  required.     See  Notick  and  Hearing. 

as  to  certificate  of  tax  sale.     See  Tax  Ckutifcate. 

to  taxpayer  that  his  laud  is  in  district  benefited  by  public  improve- 
ment, 371,  377,  378. 

to  parties  liable  to  be  assessed  for  street  opening,  379. 
NOTICE  AND  HEARING.     See  also  Hearing  and  Notice. 

required  when  special  assessment  is  apportioned  according  to  bene- 
fits, 312. 


INDEX.  853 

References  are  to  Sections. 

NOTICE  AND  HEARING  — Continued. 

not  required  in  license  taxation,  319. 

not  required  in  levy  of  poll  taxes,  319. 

not  required  in  levy  of  specific  tax'^s,  319. 

required  when  taxes  levied  according  to  value,  321. 

what  constitutes  sufficient,  319,  325,  334,  337,  338,  387. 

not  required  when  valuation  is  fixed  by  taxpayer,  320. 

must  be  afforded  before  tax  becomes  effectual,  321 

required  in  determining  value  of  estate  for  inheritance  taxation, 
322. 

decision  of  Slate  court  that  State  law  requires,  conclusive,  324. 

provision  for,  may  be  implied,  326. 

assessments  for  general  and  special  taxation  distinguished  as  to,  327. 

essential  in  reassessments,  334. 

special  necessity  for,  in  special  assessments,  376. 

required  where  valuation  for  special  assessments  is  according  to 
special  benefits,  376,  377. 

requirements  as  to,  in  general  taxation  applicable  to  special  assess- 
ments, 376. 

unnecessary  in  special  assessments  under  frontage  and  area  rules 

377. 
what  constitutes,  in  special  assessments,  381,  387,  390. 

0. 

ORIGINAL  PACKAGE, 

rule  as  to,  103. 

rule  as  to,  limits  police  power  of  State,  106,  153. 

rule  as  to,  does  not  prohibit  tax  on  interstate  importations,  110   111 

112,   113,  152.  ' 

State  cannot  prohibit  sale  of  importation  in,  114,  153. 
what  is,  115,  116. 

theory  of  exemption  of,  from  State  police  power,  116. 
when  exemption  of,  ceases,  114,  117. 
exempt  from  all  forms  of  taxation,  118. 
"OTHER  MONEYED  CAPITAL," 

competing  with  shares  in  national  banks.     See  National  Banks. 

money  at  interest  is,  271. 

means  other  taxable  moneyed  capital,  276. 

Act  requires  equality  between  tax  on  national  bank  shares  and,  277. 

stock  of  mining  corporations  is  not,  281,  282,  283. 

meaning  of,  282. 

is  capital  competing  with  business  of  national  bank,  282,  287. 

deposits  in  savings  banks  are  not,  282. 

moneys  belonging  to  charitable  institutions  are  not,  282. 


854  *  INDEX. 

References  are  to  Sections. 

"OTHER  MONEYED  CAPITAL"— Continued, 
stock  of  railroad  corporations  is  not,  282,  283. 
stock  of  manufacturing  corporations  is  not,  282. 
stock  of  business  companies  is  not,  283. 
stock  of  insurance  companies  is  not,  283. 
stock  of  trust  companies  is,  284. 
stock  of  building  and  loan  associations  is  not,  285. 
municipal  bonds  are,  285. 

P. 

PARK, 

establishment  of,  is  public  use,  374. 

PARTNERSHIP, 

whether  holding  stock  in  limited,  is  doing  business  in  State,  178,  180. 

jurisdiction  of  State  over  business  of,  409. 
PATENTS, 

how  taxable  by  States,  32. 

corporations  holding  patent  rights,  how  taxable,  33. 

ownership  and  lease  of  in  State  is  not  doing  business  therein,  176. 
PEDDLER, 

license  tax  on,  valid,  150,  459. 

definition  of,  151. 

distinguished  from  drummer,  152. 
PERSONAL  JUDGMENT, 

on  special  tax  bill  against  non-resident  without  service  void,  360. 

against  resident,  360. 
PERSONAL  LIABILITY  OF  TAX  OFFICIAL, 

decision  against,  for  error  in  assessment  does  not  raise  Federal  ques- 
tion, 528. 

distinguished  from  liability  of  State,  539. 

for  failure  to  perform  ministerial  duty,  539,  552. 

to  injunction  out  of  Federal  courts.    See  Injunction. 

does  not  attach  for  erroneous  exercise  of  discretion,  552. 

does  not  attach  to  tax  collector  for  collecting  tax  bills  fair  on  face, 
552. 
PILOTAGE, 

State  regulation  of  sustained,  204. 
POLICE  POWER  OF  STATE, 

limited  by  original  package  rule,  106. 

over  shipments  of  liquors,  107. 

meaning  of  "arrival"  in  State,  108,  124. 

distinguished  from  taxing  power  over  original  packages,  114. 

over  alien  passengers,  128. 

licensing  under,  in  relation  to  interstate  commerce,  153. 


INDEX.  855 

References  are  to  Sections. 

POLICE  POWER  OF  STATE  — Continued. 

must  not  interfere  with  interstate  commerce,  153, 154. 

over  vessels  in  harbor  or  transit,  192. 

tax  on  interstate  carrier  imposed  under,iinvalid,  210. 

compared  with  taxing  power  as  to  public  interest  justifying  exercise, 

348. 
classification  under,  compared  with  classification  for  taxation,  445, 

459. 
Federal  license  gives  no  rights  against  lawful  exercise  of,  506. 
POLL  TAX, 

notice  and  hearing  not  necessary  to  valid  levy  of,  319. 
exempting  from,  those  vcting  at  election  held  illegal,  459. 
PRESUiMPTION, 

arising  from  tax  deeds.     See  Tax  Deeds. 

that  legislature  consider  special  benefits  in  special  assessments.     See 
Special  Benefits. 
PRIVILEGE, 

meaning  of  in  claim  of  tax  exemption,  67,  87. 
distinguished  from  immunity,  87. 
tax.     See  License  Tax 
PROPERTY, 

subject  to  taxation,  and  subjected  to  taxation  distinguished,  408,  431. 
PROTEST, 

payment  under,  and  suit  to  recover  taxes.     See  Remedy  for  In- 
valid Taxation. 
PUBLIC  PURPOSE, 
In  Taxation, 

required  by  due  process  of  law,  313. 

required  by  definition  of  tax,  340. 

primarily  legislative  question,  340. 

inherent  in  tax,    aside  from  Fourteenth  Amendment,  340,  341, 

342. 
Justice  Miller,  in  Loan  Assn.  v.  Topeka,  on,  341. 
encouragement  of  manufactures  is  not,  341,  342,  352. 
aid  to  railroads,  canals  and  bridges  is,  341,  353. 
tax  for  other  than,  is  invasion  of  private  rights,  341. 
considerations  affecting   question    whether   object    of  statute 

is,  341,  346. 
aid  of  custom  grist  mill  Is,  342. 
whether  aid  of  custom  steam  grist  mill  is,  342,  348. 
irrigation  of  arid  lands  is,  344,  362. 

legislative  decision  as  to,  subject  to  judicial  review,  346 
meaning  of,  346. 
public  and  judicial  opinion  as  to  what  is,  346,  347. 


856  INDEX. 

References  are  to  Sections. 

PUBLIC  PURPOSE  —  Continued. 

whether  aid  to  destitute  farmers  is,  347. 

in  founding  scholarships  to  aid  students  at  State  University,  347. 

maintenance  of  what  schools  is,  347. 

erection  of  public  sorghum  mills  is  not,  34*, 

distinguished  from  public  welfare  justifying  exercise  of  police 

power,  348. 
as  to  inspiration  of  patriotism,  349,  351. 
as  to  promotion  of  World's  Fair,  349. 

must  appeal  to  all  people  in  taxing  jurisdiction,  349,  354,  359. 
as  to  payment  of  bounties  to  soldiers  for  enlistment,  349. 
as  to  payment  of  substitutes  for  conscripts,  349. 
as  to  payment  of  testimonials  to  soldiers  after  war,  &49. 
as  to  erection  of  memorials  to  soldiers,  349. 
as  to  maintenance  of  G-  A.  R.  post,  349. 
as  to  illumination  of  streets  of  municipality,  350- 
as  to  furnishing  fuel  to  inhabitants-of  municipality,  351. 
as  to  contract  of  municipality  lacking,  void,  352. 
pertaining  to  State  cannot  be  levied  on  part  of  State,  354. 
pertaining  to  part  cannot  be  levied  on  whole  State,  354. 
legislative  discretion  as  to  district  affected  by,  354,  480.      See 

Legislative  Discretion. 
public  park  is,  374. 

requirement  of,  applies  to  all  forms  of  taxation,  general  and 
special,  854,  359. 
In  Eminent  Domain 

distinguished  from  public  purpose  in  taxation,  351. 
preservation  and  marking  battlefield  at  Gettysburg  is,  351. 
erection  of  elevator  for  private  persons  is  not,  351. 

QUARANTINE, 

regulations,  power  of  State  to  enact,  204. 
regulations,  when  valid,  199,  204. 
QUASI  PUBLIC  CORPORATION, 

specification  of,  in  classification  for  taxation,  455,  459. 

R. 

RAILROAD, 

taxation  of  lands  granted  by  U.  S.  to.     See  Lands. 

right  of  way  through  Indian  Reservation  taxable,  27. 

property  within  State  of  interstate  railroad  taxable  by  State,  28,  31. 

franchises  granted  by  U.  S.  exempt.     See  Franchise. 

intangible  property  of,  subject  to  State  taxation,  31. 


INDEX.  857 

References  are  to  Sections. 

RAILROAD  —  Continued. 

franchise  of,  is  property,  68. 

franchises,  what  are,  91. 

when  exemption  of  constituent  road  applies  after  consolidation,  92. 

taxation  of.     See  Interstate  Car'^iiers. 

bonus  reserved  in  charter  of,  not  regulation  of  commerce,  219. 

to  be  regarded  as  unit  for  valuation,  242,  217. 

stock  of,  not  "other  moneyed  capital,"  283. 

aid  to  is  public  purpose  for  taxation,  341,  353. 

property  alone  may  be  reassessed,  440. 

classification  of  property  of,  for  taxation.     See  Classification. 
REASSESSMENT, 

of  property  under-assessed  valid,  333. 

need  not  extend  to  personalty,  333. 

of  personalty  valid,  333. 

of  local  estate,  non-resident  executor  subjected  to,  333. 

cannot  be  made  directly  by  legislative  enactment,  334. 

must  provide  for  notice  and  hearing.    See  Notice  and  Hearing 

may  include  interest  on  unpaid  old  assessment,  375. 

of  railroads  alone  valid,  440. 
RECEIVER, 

property  in  State  in  possession  of,  subject  to  State  tax,  407. 

of  Federal  court,  property  in  possession  of,  not  subject  to  seizure 
for  State  tax,  541. 

ot  Federal  court,  how  State  tax  on  property  in  possession  of  is  en- 
forced,  541. 

of  Federal  court,  how  subject  to  suit,  541. 

of  Federal  court,  how  property  in  possession  of  is  subjected  to  lien 
of  State  tax,  541. 

of   Federal  court,   injunction  issues  against  State  officer  seizing 
property  in  hands  of,  541. 
REFRIGERATOR  CARS, 

taxation  of.     See  Interstate  Carriers. 
REMEDY  FOR  INVALID  TAXATION, 

by  certiorari.     See  Certiorari. 

requiring  deposit  of  accrued  taxes  before  testing  tax  sale  not  valid, 
335. 

statutes  of  limitation  affecting.     See  Limitatiox  Statute. 

personal  liability  of  tax  official  as.     See  Personal  Liability. 

considerations  of  public  policy  affecting  procedure  to  obtain,  518. 

procedure  to  obtain,  varies  in  diff  r  nt  jurisdictions,  518. 

in  Federal  courts.     See  Jurisdiction  of  U.  S.  Circuit  Court  and 
Supreme  Court. 

practical  considerations  in  choosing  forum  for,  526. 


858  INDEX. 

References  are  to  Sections. 

REMEDY  FOR  INVALID  TAXATION  — Continued. 

by  payment  under  protest  and  suit  to  recover  Federal  taxes,  530,  651. 

by  habeas  corpus.     See  Habeas  Corpus. 

afforded  by  State  tribunals  must  be  sought  before  seeking  Federal 

injunction,  when,  536. 
afforded  by  State  tribunals,  effect  on  power  of  Federal  court  to  issue 

injunction.     See  Injunctiox. 
by  suit  against  State.     See  State. 
by  suit  to  recover  State  taxes  paid  under  protest  not  suit  against 

State,  539. 
of  receiver  of  Federal  court.     See  Receivek. 
one  having  voluntarily  paid  invalid  tax  has  no,  551. 
payment  under  protest  and  right  to  recover  is  adequate,  at  law,  563. 
RETALIATORY  LEGISLATION, 

in  conditions  for  admission  of  foreign  corporations,  164. 
conferring  reciprocity  powers  on  President  of  U.  S.  as  to  Imposition 

of  duties,  499. 
RETROSPECTIVE  LEGISLATION, 
when  valid,  79,  336. 

reassessing  property  underassessed.     See  Reassessment. 
compulsory  process  to  examine  taxpayers  as  to  false  returns  daring 

four  years,  333. 
legalizing  illegal  assessment,  334. 
limits  of  legislative  power  to  enact,  334. 
may  validate  proceedings  which  legislature  might  have  authorized, 

334,  336. 
applying  new  remedies  to  collection  of  overdue  taxes,  336. 
may  make  delinquent  taxeg  bear  interest  from  date  of  delinquency, 

336. 
must  not  be  ex  post  facto,  336. 

must  not  impair  obligation  of  contract,  336.      See  Contract. 
ROLLING  STOCK, 

taxation  of.     See  Interstate  Carriers. 
RULES  OF  DECISION, 

when  decisions  of  State  courts  are,  in  Federal  courts,  240,  547,  548. 
RULES  OF  PROPERTY, 

of  the  several  States  followed  by  Federal  courts,  548. 

S. 
SAVINGS  BANK, 

deposits  in,  not  "  other  moneyed  capital,"  282,  285. 
SECURITIES, 

of  U.  S.  exempt  from  State  taxation,  10. 

of  ij.  S.,  statutory  exemption  of  unnecessary,  13. 


INDEX.  859 

References  are  to  Sections. 

SECURITIES  —  Continued . 

of  U.  S.  subject  to  inheritance  tax.     See  Inheritance  Tax. 

of  U.  S.,  tax  evasion  through  investment  in,  37. 

forelgu-held,  tax  on  void,  71. 

taxation  by  State  or  municipality  of  its  own,  72. 

of  U.  S.,  no  deduction  for  from  assessnaent  of  national  bank  shares, 
274, 

difficulty  of  reaching,  for  taxation,  297. 

regarded  in  taxation  as  tangible  chattels  as  to  jurisdiction  of  State, 
395. 

of  State  taxable  in  State  of  owner's  domicil,  423. 

of  State  subject  to  inheritance  tax.     See  Inheritance  Tax. 
SEIZURE  OF  PERSON, 

to  enforce  collection  of  delinquent  tax  is  due  process  of  law,  331. 
SEWER, 

natural  benefited  district  subject  to  special  assessment  for,  364,  371. 

special  assessments  may  be  levied  annually  for  use  of,  371. 

special  assessments  may  be  levied  for  enlargement  of,  371. 
SHARES, 

of  corporations  holding  U.  S.  securities  taxable,  19. 

distinguished  from  capital  stock,  94,  269. 

of  national  banks.      See  National  Ba-nk-<. 
SITUS  FOR  TAXATION, 

of  vessels  at  home  port,  185, 186,  196. 

of  vessels,  not  affected  by  temporary  enrollment  as  coaster  elsewhere, 
187. 

of  vessels  under  U.  S.  registry  laws,  187. 

of  vessels,  mere  enrollment  insufficient  to  constitute,  187. 

of  vessels,  what  constitutes  home  port,  188. 

of  vessels,  when  home  port  is  not  conclusive  as  to,  189, 

of  ferry,  196.  ^ 

of  rolling  stock,  220,  221,  222,  223,  241. 

of  intangible  property  of  interstate  carrier,  258. 

national  bank  has  only  one,  270. 

of  stock  of  corporations,  285,  403,  422. 

maxim  mobilia  personam  sequuntur  yields  to  actual,  393. 

of  public  stock  is  domicil  of  owner,  400.  ^ 

of  debt  is  creditor's  domicil,  421,  423. 

of  personalty  located  elsewhere  in  same   State  is  owner's  domicil, 
424. 
SLEEPING  CARS, 

taxation  of.    See  Interstate  Carriers. 

distinguished  from  vessels  as  to  situs  for  taxation,  222. 


860  INDEX. 

References  are  to  Sections. 

SPECIAL  ASSESSMENTS, 

notice  and  hearing  required  in.     See  Notice  and  Hearing. 
theory  of,  distinguished  from  theory  of  general  taxation,  355,  356, 

362. 
based  on  theory  of  special  benefit,  355,  361,  364,  383. 
difficulties  peculiar  to,  356,  363. 
under  Fif  ih  and  Fourteenth  Amendments,  357. 
when  legislative  determination  is  conclusive  in.     See  Legislative 

Discretion. 
for  drainage  valid,  361. 
for  irrigation  valid,  362. 
difficulty  of  determining  special  benefits  for.     See  Special  Bene- 

FITS. 

for  public  improvements  in  municipalities,  363. 

levied  by  what  methods  of  apportionment,  365. 

basis  of  apportionment  for,  may  be  fixed  in  municipal  charter,  365. 

See  Municipality. 
application  of  uniformity  clause  in  State  constitution  to,  366. 
application  of  equality  clause  in  State  constitution  to,  366. 
application  of  requirement  that  taxation  shall  be  ad  valorem  to,  366. 
for  sewers.     See  Sewers. 

on  land  not  abutting  on  streets  paved  valid,  372. 
for  street  improvements,  sustained,  372,  373. 
for  public  park  sustained,  374. 

if  invalid,  reassessment  may  be  made,  375,  383.   See  Reassessment. 
due  process  of  law  in,  does  not  require  judicial  proceeding,  376. 
due  process  of  law  in,  substance  not  form  considered,  380. 
enforcement  of,  381. 
decision  in  Norwood  v.  Baker  as  to  excess  of,  over  special  benefits. 

See  Special  Benefits. 
levied  by  area  and  frontage  rules.    See  Area  and  Frontage  Rules. 
summary  of  decisions  of  Supreme  Court  as  to,  390. 
SPECIAL  BENEFITS, 

difficulty  of  determining,  362,  364,  368. 

apportionment  for  special  assessments  need  not  be  according  to,  367. 

apportionment  by  legislature  excludes  consideration   of,  368,  373, 

377. 
legislature,  in  fixing  basis  of  apportionment,  presumed  to  consider, 

368,  369,  377. 
theory  of  legislative  conclusiveness  based  on  impracticability  of 

valuing  judicially,  368,  369. 
Norwood  V.  Baker  that  taxpayer  must  be  allowed  to  show  excess  of 

assessment  over,  383. 


INDEX.  861 

References  are  to  Sections.    ^ 

SPECIAL  BENEFITS  — Continued. 

Norwood  v.  Baker  that,  to  invalidate  assessnaent,  excess  of,  must  be 

material,  383. 
Norwood  V.  Baker  that  ass^sment  in  excess  of,  is  not  due  process 
of  law,  383,  384. 
SPECIFIC  TAX, 

on  properly  may  be  levied  without  notice  and  hearing,  319. 
distinguished  from  tax  according  to  value,  319. 

STATE, 

taxing  power  of.     See  State  Taxing  Power. 

relation  to  Federal  government  assumed  by  new,  2. 

definition  of,  2. 

equality  in  right  and  power  of,  with  other  States,  2. 

sovereignty  of,  how  affected  by  act  of  admission,  2,  194. 

decisions  of  State  courts  upon  laws  of.    See  Construction  of  State 

Law. 
may  stipulate  medium  in  which  taxes  shall  be  paid,  38. 
power  of,  to  exempt  from  taxation.     See  Exemption- 
distinguished  from  State  government,  539. 
control  of,  over  proceeds  of  municipal  taxation,  78. 
control  of,  over  commerce.     See  Commerce. 
inspection  laws  of.     See  Inspection  Laws. 
sovereign  power  of,  over  municipalities,  359. 
cannot  be  sued  without  its  consent,  538. 

when  indispensable  party,  Federal  court  has  no  jurisdiction,  538,  540. 
as  assignee  suing  otner  State  on  its  bonds,  638, 
suable  only  in  court  indicated  by  its  consent,  538. 
suit  against,  and  against  State  ofBcial  distinguished,  539. 
cannot  be  compelled  to  perform  contracts,  539. 
what  constitutes  suit  against,  539. 
immunity  of,  from  suit  does  not  extend  to  municipalities,  539.     See 

Municipality. 
immunity  of,  from  suit,  when  does  not  prevent  recovery  of  tax  paid 

under  protest,  539. 
immunity  of,  from  suit,  when  does  not  prevent  injunction  against 

Illegal  tax,  540. 
being  real  defendant,  though  not   party  to  record,  jurisdiction  of 

Federal  court  fails,  540. 
STATE  TAXING  POWER, 

restricted  by  U.  S.  Constitution,  2,  97. 

when  concurrent  with  that  of  Congress,  2,  3,  6,  101,  195,  204,  479. 

express  limitations  upon,  2,  3. 

limitation  upon,  growing  out  of  Federal  supremacy,  2,  6,  6,  7,  8,  9. 

exemption  of  Federal  agencies,  6,  7,  8,  28,  31. 


862  INDEX. 

References  are  to  Sections. 

STATE  TAXING  POWER  — Continued. 

exemption  of  securities.     See  Securities 

salaries  of  U.  S.  oflacials  exempt,  14. 

mail  carriages  exempt,  15. 

passengers  in  mail  carriages  exempt,  15. 

corporations  holding  U.  S.  securities,  bow  taxable,  16, 17,  18,  19. 

interstate  passengers  exempt,  20. 

property  of  U.  S-  exempt.     See  Lands. 

Indian  Reservations  exempt.     See  Indian  Reservations. 

interstate  railroads,  how  taxable.     See  Railroads. 

letters    patent    and    copyrights    exempt.     See    Copyrights    and 

Patents. 
mheritances  subject  to.     See  Inheritance  Tax. 
treaty-making  power  in  relation  to,  36. 
evasion  of,  through  investment  in  U.  S.  securities,  37. 
over  its  own  obligations,  72. 

supreme  over  completely  internal  commerce  of  State,  101. 
over  commerce.     See  Commerce. 
scope  of,  126. 

over  imports  and  exports.     See  Imports  and  Exports. 
over  corporations.     See  Corporation. 
over  vessels.     See  "Vessels. 

difficulty  of  distinguishing  from  Federal  control  over  commerce,  205. 
distinguished  from  construction  of  State  statute,  256. 
over  interstate  carriers.    See  Interstate  Carriers. 
over  national  banks.     See  National  Banks. 

restrained  by  Fourteenth  Amendment.     See  Fourteenth  Amend- 
ment. 
restrained  by  constitution  of  State.     See  Constitution  of  State. 
involves  exercise  of  legislative  power,  431. 
STATUTE  OF  LIMITATIONS.    See  Limitation  Statute. 

STREET  IMPROVEMENTS, 

special  assessments  for.     See  Special  Assessments. 

SUPREME  COURT, 

when  bound  by  State  construction  of  State  law.     See  Construction 

of  State  Law. 
considers  special  assessments  only  in  relation  to  due  process  of  law, 

870. 
jurisdiction  of,  broader  under  Fifth  than  Fourteenth   Amenc^ment, 

370. 
motions  in  dismissal  in,  542. 
independent  judgment  of,  as  to  questions  of  general  law,  548. 


INDEX.  863 

References  are  to  Sections. 

SUPREME  COURT  — Continued. 

Appellate  Jurisdiction  Over   U.  S.  Circuit  Court, 

permits  review  of  decision  as  to  general  principles  of  constitu- 
tional law,  342,  343,  344. 

jurisdiction  of   U.  S.  Circuit  Court  over  case  essential  to.     See 

Jurisdiction  of  U.  S.  Circuit  Court. 

essential  to,  that  decision  below  on  Federal  claim  shall   h&ve 
been  controlling,  519. 

amount  in  controversy  immaterial  as  to,.520. 

extends  to  review  of  construction  by  Circuit  Court  of  State  Jaw, 
526. 

extends  to  all  questions  involved  in  case,  527. 

where  legal  and  equitable  claims  were  blended,  532. 
Appellate  Jurisdiction  Over  State  Court, 

how  limited  by  Judiciary  Act  of  1789,  314.  • 

does  not  extend  to  general  principles  of  constitutional  law  in 
case,  342.  344. 

depends  on  existence  of   Federal  question   in  case,    343,    382. 
See  Federal  Question. 

reviewing  of  decision  as  to  validity  of  assessment  under  Four- 
teenth Amendment,  344. 

requires  that  claim  of  Federal  right  have  been  distinctly  made 
in  record,  519,  523. 

requires  that  procedure  adopted  to  resist  tax  must  have  been  ap- 
propriate under  State  law,  619. 

amount  in  controversy,  immaterial  as  to,  520. 

only  essential  to,  is  denial  by  State  of  Federal  right,  520,  523. 

requires  that  adverse  decision  of  State  court  shall  have  been  de- 
cisive of  case,  523,  524. 

requires  that  averment  of  Federal  claim  shall  have  been  distinct 
and  positive,  523. 

attaches  notwithstanding  erroneous  decision  of  State  court  that 
the  question  is  not  Federal,  523. 

attaches  where  Federal  question  is  decided  on  motion  for    re- 
hearing, 523. 

attaches    where  Federal  question  is  decided    on    ambiguous 
pleadings,  523. 

pleading  Federal    question    in   condemnation   proceedings    to 
sustain,  523. 

essential  to,  that  specific  claim  of  Federal  right  appear  on  record, 
523. 

when  refusal  of  State  to  pass  upon  Federal  claim  does  not  sus- 
tain, 523. 

does  not  extend  to  review  of  decisions  of  fact  in  State  court,  524. 


864  INDEX. 

References  are  to  Sections. 

SUPREME  COURT  —  Continued. 

Appellate  Jurisdiction  Over  State  Court, 

attaches  where  State  court's  decision  is   on    legal    effect    of 

evidence  relating  to  Federal  question,  524. 
writ  of  error  issued  under,  is  to  highest  State  court   having 

jurisdiction,  525. 
what  is  final  judgment  of  State  court  as  to,  525. 
does  not  extend  to  review  of  decision  sastaiuing  Federal  claim, 

526. 
limited  to  review  of  decision  on  Federal  claim,  527. 
requires  that  Federal  claim  shall  have  been  set  up  in  adversary 

proceedings,  529. 

T. 

TAX, 

is  not  debt,  398,  440,  512. 

distinguished  from  license,  409,  411. 

varieties  of  Federal  taxes,  defined  and  distinguished,  485,  486. 

what  constitutes  direct.     See  Direct  Tax. 

what  constitutes  excise.     See  Excise  Tax. 

nature  of,  to  be  determined  by  actual  operation,  488.     See  Inherit- 
ance Tax;  License  Tax  and  Taxation. 
TAXATION, 

power  of,  defined,  1,  341. 

power  of  Confederation,  1. 

power  of  Congress.     See  Congress,  Taxing  Power  of. 

power  in  internal  taxation,  basis  of,  2. 

power  of  State.     See  States,  Taxing  Power  of. 

defined,  101. 

inequality  inevitable  in,  311. 

judiciary  reluctant  to  interfere  with  State  system  of,  315,  335,  370, 
450. 

power  of,  liability  to  abuse,  341. 

power  of,  most  pervading  of  governmental  powers,  341. 

theory  of,  general  and  special,  355. 

compared  with  regulation  under  police  power,  411. 

and  regulation  may  be  authorized  by  same  law,  412. 

power  of,  must  be  exercised  by  legislature,  431. 

congressional  power  of,  not  exhausted  when  once  exercised,  512. 
TAX  CERTIFICATE, 

holder  of    tax,  required   to  notify  landowner   of    application    for 
deed,  79. 

when  issuance  of  tax,  without  notice  to  taxpayer,  is  valid,  338. 


INDEX.  865 

Beferences  are  to  Sections. 

TAX  DEEDS, 

requiring  deposit  of  accrued  taxes  before  contesting,  void,  335. 
not   made    conclusive    by  limitation  statute   where  tax  levy  was 

void,  336. 
may  be  ma,de  prima  facie  evidence  of  valid  precedent  procedure,  337. 
may  not  be  made  conclusive  as  to  holder's  title  to  land,  337. 
conclusive  presumption    arising    from,   not    alone    denial   of  due 

process,  337. 
defects  covered  by  conclusive  presumption  must  amount  to  denial  of 

due  process,  337. 
may  be  made  conclusive  as  to  prior   procedure  in  collateral  pro- 
ceedings, 37. 
TAX  PROCEDURE, 

requirements  of  due  process  of  law  in.     See  Due  Process  of  Law. 
TELEGRAPH  COMPANY, 

government  agency  under  Act  of  Congress,  216,  249. 

taxation  of.    See  Interstate  Carriers. 

rental  charged  for  use  of  streets  by  poles  of,  must  be  reasonable, 

218. 
valuation  of,  by  unit  rule.    See  Unit  Rule. 
TENDER, 

of  tax  receivable  coupons  equivalent  to  payment,  55. 
of  valid  part  of  excessive  tax.    See  Injunction. 
TERRITORY, 

has  same  taxing  power  as  State  over  national  banks,  273. 

direct  tax  need  not  extend  to,  490. 

levy  of  duties  on  captured,  under  war  power,  493. 

acquired  by  conquest  not  foreign  for  taxing  purposes,  494,  495,  498. 

conquered  by  United  States,  when  liable  to  imposition  of  duty.     See 

Duty. 
"appurtenant"  distinguished  from  "incorporated  "territory,  495. 
Justice  Gray  on  "  transition  period  "  in  incorporation  of  acquired, 

495. 
acquired  by  conquest    neither    foreign  nor  domestic    for    taxing 

purposes,  498. 
taxing  power  of  Congress  over  persons  and  property  in,  498,  515. 
TONNAGE  TAX, 

State,  invalid,  185. 

what  constitutes,  194,  199,  200,  201. 

property  tax  proportioned  to  tonnage  distinguished  from,  200. 

wharfage  charges  distinguished  from,  200,  201. 

wharfage  charges  graduated  by  tonnage  not,  202. 

jurisdiction  of  United  States  Circuit  Court  over  suits  arising  under 

Act  imposing,  520. 

55 


866  INDEX. 

References  are  to  Sections. 
TREATY, 

does  not  control  State  inheritance  taxation,  36. 

does  not  control  State  power  to  exclude  foreign  corporations,  162. 

may  be  revoked  by  subsequent  statute,  500. 
TRUST  COMPANY, 

is  not  banli,  284. 

stock  in  is  "  other  moneyed  capital,"  284. 

TUG-BOATS, 

State  license  on,  when  invalid,  191. 

U. 

UNIFORMITY  IN  FEDERAL  TAXATION, 

required  in  all  indirect  taxes,  491. 

is  geographical,  not  intrinsic,  491. 

tax  on  alien  passengers  consistent  with  requirement  of,  491. 

tax  on  sales  made  on  commercial  exchanges  consistent  with  require- 
ment of,  491. 

inheritance  tax  consistent  with  requirement  of,  491. 

distinguished  from  uniformity  under  State  constitution,  491. 

what  constitutes,  491. 

levy  of  custom  duties  consistent  with  requirement  of,  492. 

requirement  of,  applied  to  territory  acquired  by  conquest,  494,  495. 
UNIFORMITY  IN  STATE  TAXATION.     See  Constitution,  State. 
UNITED  STATES.     See  Federal  Taxing  Power. 

not  an  eleemosynary  corporation,  34. 

privileges  and  immunities  of  citizens  of.  See  Fourteenth  Amend- 
ment and  Congress. 

what  constitutes  general  welfare  of,  481. 

what  are  debts  of,  483,  484. 

UNIT  RULE, 

involves  mileage  apportionment.     See  Mileage  Apportionment. 

in  valuation  of  intra-state  properties,  239,  240,  242. 

in  valuation  of  interstate  properties  sustained,  243,  244,  247. 

does  not  allow  taxation  of  extra-state  property,  244,  247,  250. 

requires  modification  where  value  without  State  is  disproportionate, 
245. 

entire  property  in  use  considered  in  valuing  part  within  State,  247, 
248,  250. 

in  taxation  of  telegraph  companies,  249. 

board  presumed  to  have  allowed  for  disproportionate  value  of  extra- 
state  property,  245,  250,  263. 

applied  to  express  companies,  251,  252,  253,  254,  255,  256,  257,  258, 
259. 


INDEX.  ,  867 

References  are  to  Sections. 

UNIT  RULE— Continued. 

exceptional  circumstances  requiring  deduction  must  be  shown,  253, 

257,  405. 
summary  of  decisions  of  Supreme  Court  as  to,  260,  261,  262,  263. 
consiijtent  with  equal  protection  cf  laws,  441. 

V. 

VALUATION  FOR  ASSESSMENT, 

equality  in,  essential  to  equality  in  taxation,  292,  463,  470. 
discrimination  in,  must  be  intentional  and  habitual,  292,  294,  295, 

290,  469. 
of  national  bank  shares,  discrimination  in.     See  DiycuiMiNATiON. 
for  public  improvements.     See  Special  Assk-smknts. 
equality  in,  renders  basis  of  assessment  immaterial,  463. 
equality  in,  prevented  by  error  of  assessor's  judgment,  464. 
inequality  in,  for  State  tax  due  to  unequal  assessments  for  local 

taxes,  465. 
equality  in,  secured  by  separating  sources  of  State  and  municipal 

revenue,  465. 
discrimination  in,  through  fraud  of  assessors,  how  remedied,  466, 

467,  476. 

discrimination  in,  through  relative  un.'ervaluationof  other  property, 

407. 
discrimination  in,  though  plaintlflE's  property  is   valued  below  true 

value,  467. 
dilemma  of  courts  in  remedying  discrimination  in,  468,  470,  471   47'> 

473. 
presumption  that  assessor  does  official  duty,  468,  469. 
conflict  between  statutory  requirement  of,  at  cash  value  and  equality 

essential  in,  468,  470,  472. 
discrimination  in,  by  relative  undervaluation  remedied  by  courts, 

470,  471,  472,  476. 
discrimination  in,  must  be  distinctly  alleged  and  proved,  469. 
Justice  Field  on  discrimination  in,  471. 
Judge  Taft  on  dilemma  of  courts,  472,  473. 
distinction  between  sporadic  and  habitual  discrimination  in,  473. 
expressed  intention  of  assessors  to  discriminate  in,  unnecessary,  475. 
what  evidence  of  assessor's  intention  is  sufficient,  473,  470. 
of  corporation.     See  Corporation. 
by  capitalization  of  net  earnings,  237,  477. 
summary  of  requirements  of  14th  Amendment  as  to,  478. 
VESSELS, 

State  taxing  power  over,  how  limited,  185. 

employed  in  interstate  commerce  taxable  only  at  situs,  185. 


868  INDEX. 

References  are  to  Sections. 

VESSELS  —  Continued. 

what  is  situs  of,  for  taxation.     See  Situs. 

not  subject  to  State  tax  for  privilege  of  navigating  public  waters, 
190,  191,  196. 

tolls  levied  upon,  for  navigating  improved  rivers,  191,  194,  202. 

in  harbor  or  transit,  State  police  power  over,  192. 

State  power  to  license,  for  oyster  dredging,  193.     See  Ferries. 
VESTED  RIGHTS. 

not  impaired  by  inheritance  tax  law,  75. 

relation  of  limitation  statute  to,  79. 

in  fruits  of  false  returns,  taxpayer  has  no,  333. 

W. 

WHARFAGE  CHARGE, 

distinguished  from  tonnage  tax.    See  Tonnage  Tax^ 
must  be  without  discrimination,  203. 


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